Why Visa Is The Most Popular Card In USA

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In 2019 people of the USA spent 6.7 trillion dollars using credit and debit cards and more than 60% of these transactions are made with Visa Card. In October 2021 Visa’s valuation was more than $480 billion. In 2021 Visa’s net revenue was $24,105 million and net income was $12,311 million. From the below post let’s find out Why Visa Is The Most Popular Card In USA.

How Visa Started Journey In USA

In September 1958 Bank Of America launched its first Credit card program for small businesses and middle-class people. In 1970 Bank Of America gave up direct control over the card, they passes the control to a group of the issuer bank. That issuer bank continues to control, and circulate the card among customers which expanded the network in the USA. The company grew rapidly and started to operate globally. In 1974, Visa introduced the first debit card in 1975. In 1976 the company changed its name to VISA.

In October 2007 Visa completed its corporate restructuring and went public in 2008 as Visa Inc.Currently, Visa has 3.5 billion cards across 200 countries. Visa became the world’s largest card payment company till 2015 when China Union Pay surpassed them. A report published by Nelson suggested that Visa generated over 4 trillion in purchase volume in the United States.                    

How Visa Generates Revenue

Visa doesn’t make money directly from its users. They give permission to Banks issues card for the consumer to use for transactions. Peoples think that those cards are the property of Visa, but they are not, they are properties of issuing banks.

Visa’s business model relies on the ‘Four Party Business Model’.When a customer uses a Visa card to purchase four entities come into play.

  1. The customer makes the purchase.
  2. The bank holds the customer’s money.
  3. Seller sells his products.
  4. Visa comes as a middle man to complete the purchase smoothly.

Experts term this as a physical network that connects more than 18000 banks and financial institutions around the globe which carry money to its users digitally.When someone made a transaction through a Visa card a series of messages run between banks and from where customers are purchasing the product. And finally, Visa helps to settle the money in merchant’s accounts from buyer’s accounts safely.

Visa’s 39% of gross revenue comes from processing fees which are required at the time of transactions, and 34% comes from service revenue charges. (Visa charges their card issuers like banks for using the Visa payment method system),22% comes from international revenue and the other 5% of revenue comes from a Visa investment(Visa invests in various other payment methods that may bring Visa more revenue in near future).    

Controversy

Besides the sublime success of Visa, it also faced investigational legal cases over the year. Visa has been sued by the department of justice multiple times for its rules. They were sued for antitrust issues.

According to Visa, a bank issuing Visa cards cannot issue cards from American Express and Discover. In another rule, Visa makes it mandatory for any merchant to use both Debit Card and Credit Card to take payments from customers.

In December 2019 Master Card and Visa are forced to pay 5.5 billion dollars to settle against merchants who accused them of charging excessive fees. In August 2021 again Visa and Mastercard were accused of charging excessive ATM fees to operators and consumers. Small business owners accused Visa of high swipe fees. Swipe fee comes as the second highest expense line item after labor cost for a small or medium business owner.

According to a report in 2009 Visa and Mastercard collected 25.6 billion dollars as swipe fees. In 2019 after a decade later the number rises more than doubled standing at 67.6 billion dollars.

After all allegations, one thing is certain Visa changes the type of transaction to the next level. It makes consumer’s life fantastic on the other hand with all debates it makes merchants’ life more hassle-free. The argument on visas will go on but in reality, the alternatives are currently also expensive. But it’s easy to pay facility, contactless, quick payment options just facilitate the whole world of commerce.

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