Porter’s Five Forces Analysis of Visa
Key Facts
| Name | Visa |
| Industry | Digital/Card Payment |
| Founded | 1958 |
| Headquarters | San Francisco, California in United States |
| CEOs | Alfred F. Kelly Jr. |
| Revenues | $ 25.5 billion,2022 |
| Profit | $ 12.8 billion, 2022 |
| Competitors | Apple Pay, Alipay, Mastercard, Stripe, Paypal, American Express |
Company Overview
Visa, Inc. is a company that mainly provides payment services.Visa is the world’s largest publicly listed payments processing firm. It also promotes global trade by facilitating the exchange of value and information among a worldwide network of consumers, merchants, financial institutions, corporations, strategic partners, and government agencies. As of 2022, the enterprise was placed 147th on the Fortune 500 list of the greatest corporations in the United States by revenue. Visa’s total assets in 2022 were $85.5 billion, a 3.14% increase over 2021.Visa’s annual revenue in 2022 was $25.5 billion, a 21.59% increase over 2021.Dee Hock created the firm in 1958, and it is headquartered in San Francisco, California.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Micheal E. Porter in 1979, at Harvard Business School.
Visa Rivalry among Existing Competitor
- Visa Business Segments:Visa’s net worth is $411.73 billion as of January 10, 2023.It provides debit, credit, and prepaid cards, as well as commercial payment solutions and global ATMs. Visa offers mainly five types of cards for payment and they are Visa Classic, Visa Gold, Platinum, Visa Signature, and Visa Infinite.
- Visa Global Operations Year 2021-22: Visa’s yearly revenue in 2021 was $24.105 billion, a 10.34% increase over the previous year. Over a three-year period, Visa managed to increase earnings per share by 10% every year. Visa’s fourth-quarter net revenue increased 18.7% year on year to $7.8 billion (which ended Sept. 30). Net revenue growth at the company was driven by double-digit percentage increases in payments volume, total cross-border volume, and processed transactions.
- Master Card: It provides payment solutions for the creation and management of credit, debit, prepaid, commercial, and payment systems. It made $18.9 billion in revenue and $8.7 billion in profit in 2022. Its assets are valued $37.7 billion.
- PayPal: PayPal Holdings, Inc. is a company that creates technological platforms for digital payments. In 2022 PayPal generated $25.6 billion in revenue and $4.2 billion in profit. It has assets of $75.8 billion.
- American Express Co:American Express Co. provides payment and credit card products, as well as travel-related services. It earned $46.3 billion in revenue and $7.9 billion of profit in 2022.
It has $196 billion worth of assets.
- Investment in Research & Development-Marketing Cost and Brand Image: Visa’s success is strongly related to the continuous improvement of its card. Because of its success, it has grown into the world’s largest all-purpose payment system. Visa credit cards offer convenience and security to cardholders and are used at retailers and automated teller machines (ATMs) worldwide.
Visa Threat of New Entrants
- Payment card Industry:The number of payment cards in circulation globally increased by more than two billion between 2019 and 2021, and this trend is anticipated to continue.
- High Capital Investment- Trained Human Resources: Through educational support program, Visa provides employees with additional growth opportunities. Visa University is a team of learning and development specialists, with physical campuses in California and Singapore, as well as a worldwide digital campus, all working together to train the workforce.
- High Research & Development Cost: Visa has cooperated with leading US universities to perform research and analysis on artificial intelligence, biometric payments, and digital currencies in order to design innovative payment systems for the future.
- Technological Advancement: The Visa Innovation Program is managed by the local partners in Bulgaria, Greece, and Turkey. It involves further expansion of business in FinTech through Digital wallets and Blockchain technology like crypto-currencies, NFTs, smart contracts.
Visa Bargaining Power of Suppliers
- Supplies Industry Influencer: Visa is the brand name of the Visa International Service Association, which is owned by 20,000 member banks that are authorized to issue Visa cards under their own names. For example, Bank of America Visa or Wells Fargo Visa cards for online and card based transactions are issued to the customers.Visa International itself does not issue cards or make credit available to cardholders.
- Suppliers Collaboration: Visa card allows the users to process the transactions and access their cash through more than 2.5million ATM’s globally.When a consumer swipes their credit, debit, or prepaid card, Visa typically receives a minor share per transaction. The number of transactions processed annually is the primary indicator for their profit generation.
Visa Bargaining Power of Buyers
- High Product Differentiation:Above Visa Signature and Visa Traditional, Visa Infinite is the highest category of Visa-branded credit cards. Only a few Visa Infinite cards are available in the United States, as they are normally reserved for the most prestigious credit cards that provide the finest additional benefits of any card on the Visa network.
- Customer Satisfaction – After Sales Services: While both of the service providers Visa and Mastercard offer purchase protection and insurance, travel advantages, and emergency assistance to cardholders, Visa Signature provides substantially more. Members of Visa Signature have access to benefits such as roadside assistance, extended warranties, a Global Entry statement credit, etc.
- Government Rules & Regulations: The role of governments and central banks in overseeing payment systems is primarily to ensure that current systems are secure, reliable, and preserve consumer trust.
Visa Threat of Substitute Products or Services
- Card payment transactions:According to Statista, some of the major brands on cards issued throughout the world are UnionPay, Visa, and MasterCard. In worldwide comparison, China has the greatest transaction value for digital payments, which is US$3,851 billion in 2023.
- Brand Loyalty:Visa cards are authorized in over 200 nations and territories worldwide. It provides a safe and dependable method to pay for everything you need, wherever you are in the world on a daily basis. According to Statista, Visa is the unarguable global payment processor leader, processing more than $10 trillion in payments each year.
- Post-COVID 19 Market: Visa is the indisputable global payment processing leader.However, the world’s two other credit card tycoons, Mastercard and American Express, have already been surpassed by providers from the digital and mobile payment competition, according to data aggregated by Statista. Apple Pay and Alipay are the world’s second and third-largest payment providers, respectively, surpassing $6 trillion in payments processed per year. PayPal, Amazon Pay, and Samsung Pay, according to Statista researchers, are considerably smaller competitors in the digital payment business, which is only projected to grow in the subsequent years.
References
- Forbes, Profile, Visa
- Forbes, Profile, Mastercard
- Forbes, Profile, PayPal
- Forbes, Profile, American Express
- Statista (September 2022) Digital Payments Catch up to Credit Card Giants| Statista. Availableat.Statista
- Statista (August 2022) Mobile Payments II: The business models behind mobile payments| Statista. Availableat.Statista.
- Statista (September 2022) Digital Markets Insights – FinTech. Digital Payments – Worldwide| Statista.Availableat Statista
- Statista (October 2021) |Number of credit, debit and prepaid cards in circulation worldwide from 2017 to 2021, with forecasts for 2023, 2025, and 2026(in billions) | Statista. Availableat. Statista.
- How Visa Makes Money? Visa’s data processing and services units generate the most revenue.Available at Investopedia
- Visa vs. Mastercard: What’s the Difference?Here’s a look at the world’s two largest payment card network processors.Available at Investopedia
- Statista (March, 22, 2022) |BMW Group’s global automobile deliveries from 2007 to 2001 | Statista. Statista.Availableat. Statista
- Statista (May, 24, 2022) |BMW car sales in Europe from 2011 to 2021 | Statista. Statista.Availableat. Statista
- Visa company website| VISA RESEARCH – Creating the future of payments for everyone, everywhere. Available atVisa