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Monday, February 25, 2008

Personal Finance QuickTake: Visa IPO

Visa is set to launch an IPO (Initial Public Offering) before the end of March according to the AP. Based on the initial numbers this may be the largest IPO ever. The offering is expected to raise $19 Billion , if it does it would signal to Wall Street that the market is back up and running.

Visa's IPO will have little initial affect on its customers, but the banks that issue the cards are expected to share a $10 Billion windfall. This influx of cash could keep banks from raising rates or cutting back on consumer credit lines.

Both MasterCard and Visa are not banks nor lenders, they are transaction processors that get paid fees by the issuing banks. This is different from American Express or Discover that offer and back the banks themselves.

Visa is the largest US processor of these transactions with over 50% market share. Last year Visa processed 44 Billion transactions, or $3.2 Trillion Dollars, nearly double MasterCard. Visa will be the last major credit card provider to go public as MasterCard and Discover went public last year.

What this Means:

Visa gets paid for the transaction we place whether or not we pay them off the next day or not. But 44 Billion transactions? That is 7 transactions for every man, women and child on the planet! $3.2 Trillion equals $533 for every man, women and child on the planet! And these numbers are only Visa. Add in MasterCard, Discover, American Express...

This is really amazing! This is an industry that is really younger than 50 years old! Sadly this is a very scary amount of transactions and debt that we as a people are ringing up. At some point it becomes overwhelming and could lead to massive amounts of bankruptcies and people not saving for their futures.

Are we moving to a non-currency world? Are you breaking your debt chains or adding to them?


Sharon said...

Those are amazing and mind boggling numbers...

Fiscal Musings said...

I hardly ever use cash anymore. Sometimes you just have to, but I find that I have to plan to have cash when I need it rather than it just being there. I'm hooked on the rewards cards.

RacerX said...

@Sharon- I couldn't believe them either...Really scary. And Card have only been around in full use for what, 20+ years! $3.2 Trillion!!!

@Fiscal- I know more and more folks just like you. You just have to be so disiplined to pull it off. A couple late fees and it is for not. I also spend less using cash. It had trimmed over 33% off of the grocery budget alone!

Thanks for reading!

Mrs. Micah said...

Hence why I'd invest in them. Except that I like index funds for safety...I'm a "conservative" type when it comes to investing.

RacerX said...

That triggers this then:

"Better to Participate in their profits than contribute to them!"

Thanks for commenting!

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