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Visa (V) Acquires Earthport to Boost Bank Transfer Business

Zacks Equity Research
The buyout of Earthport is expected to bolster Visa's cross-border business.

Visa Inc. V has acquired Earthport, a U.K-based company. The deal is expected to bolster Visa’s cross border payments business, and allow customers to make account to account transfers via their banks.

The closure of Earthport deal for $257 is a win for Visa, as rival Mastercard  was also keenly interested in buying the same. Later, Mastercard withdrew itself from bidding and went on to acquire another company Transfast.

Earthport’s purchase, though made at a high premium valuation, is the best move for Visa given the former’s relationship with 87 banks which will provide a ready account to account money transfer market for Visa.

The buyout of Earthport will bolster the company’s cross-border business, a subset of payment volume, which is captured when an account holder in one country uses his/her payment credentials to make purchase in another country.

With Earthport, Visa will enable transfer of funds for its customers through bank accounts worldwide, in contrast to the current method where the funds are transferred via Visa cards. The company will be able to gain a part of the vast account to account transfer area. Last year, nearly $80 trillion was transferred via wire transfers or bank accounts worldwide.

The deal will add to Visa’s cross-border volume growth which on a constant dollar basis was more than 10% in fiscal 2018 and has been growing from past many years.

Visa has been aggressive in making acquisitions in strategic areas to accelerate its position in the rapidly changing global payments market. The impact and influence of digital payments is expanding rapidly, fueled by the proliferation of smart connected devices, adoption of technology that enables payment in new environments, and growth in under penetrated payment segments like business-to-business.

Visa’s ability to navigate the accelerating pace of change, and maintain its position at the heart of digital payments has been achieved on the back of numerous buyouts over the past many years.

In a year's time the stockhas gained 22%,compared with the industry's growth of 15%.

Visa carries a Zacks Rank #2 (Buy). Other stocks worth considering are FleetCor Technologies, Inc. FLT, Worldpay, Inc. WP and Green Dot Corp. GDOT. Each of these stocks carries a Zacks Rank #2 and has average four quarter positive surprise of 1.71%, 5.2% and 17.4%, respectively. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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