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Coronavirus Pandemic Opens Up a Pool of Opportunities for Visa

Zacks Equity Research
·4 min read

Even though a pall of gloom fell on the economy with the COVID-19 outbreak, there's a small silver lining for Visa Inc. V with consumers increasingly opting for tap-to-pay solutions on health grounds and merchants making concerted efforts to that end.

Even though the coronavirus pandemic impacted the company’s operating performance in recent quarters,  there are many trends that are accelerating demand for consumer payments and value-added services, which will help nurture its business in times ahead. In the consumer payments space, there is ample scope for growth via electronic transactions. This is evident from an $18-trillion amount being transacted in cash and checks globally, which lends Visa a chance to transform physical payments into digital.

In the current pandemic-ravaged environment, people are sensitive to touching surfaces including cash and checks and as an evidence, the company is witnessing this tap to pay payment  gain a huge momentum. It not only helps digitize cash for low-ticket items but also historically increased transactions over time by 20%, on average in the worldwide mature markets.

Tap to pay, a contactless method of payments, is likely to be more frequently used post-COVID, especially as consumers start rejoining offices where they tend to conduct smaller transactions for their commute, paying for public transit fares and buying refreshments. In the US alone, Visa added over 80 million contactless cards in the first six months of this year.

Another positive trend is the steady shift to e-commerce. This works in favor of the company because Visa's share of digital commerce wherein cash is not an option is approximately thrice the physical point of sale.
The company is also penetrating the buy now pay later market and to this end, partnered with the existing installment players like Affirm, Afterpay, Klarna, and others.

Further, Visa is exploring business to business (B2B) payments space via its program B2B Connect, a platform designed to give financial institutions a secure, fast and predictable option to process corporate cross-border B2B payments. Many banks are in the stage of implementing the program. And when they will start using the service by this year-end, Visa will be processing cross-border transactions in half of the 80 markets where its B2B Connect capability is available.

Additionally, the company is advancing with real-time payments and recently expanded its partnership with PayPal Holdings, Inc. PYPL. This new global agreement will allow PayPal and all its brands to offer fast Visa Direct-enabled domestic and cross-border payments and extend its PayPal's real-time transfer capabilities globally.

Even with massive pressures on the economies around the world, many aspects of Visa's business are time and again proven to be resilient. The company’s consistent investments in consumer payments and value-added services will propel its growth big time.

Visa looks like a company, well-equipped with a significantly strong growth profile. The company’s asset-light business model coupled with a solid balance sheet and consistent favorable cash flow generation makes it a stock to hold on to for reaping great returns to yield-seeking investors.

In the past six months, the stock has rallied 21% compared with its industry’s growth of 23%.

The stock currently carries a Zacks Rank#3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Some better-ranked stocks in the same space are Equifax Inc. EFX and Evertec Inc. EVTC, both presently carrying a Zacks Rank #2 (Buy).

Earnings of Equifax as well as Evertec surpassed estimates in the last reported quarter by 22.14% and 18.75%, respectively.

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Equifax, Inc. (EFX) : Free Stock Analysis Report
 
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