TOP DOGS in finance used to be big banks with trillion-dollar balance-sheets. No longer. Earlier this month Visa, a humble payments processor, became the world’s most valuable financial-services company. The ongoing stockmarket rout has dragged Visa’s share price down, with analysts cutting forecast revenues from transaction fees, as the coronavirus forces self-isolating consumers around the world into a shopping hiatus. But it has suffered less than erstwhile title-holders like JPMorgan Chase. That investors view Visa as more resilient than Wall Street is perhaps more revealing even than its still eye-popping $291bn market capitalisation. How did a mere cog in the system end up here?
Ask Visa’s bosses and they crow about their firm’s tech and marketing nous. That is a part of it. But the deeper reason for Visa’s success is more prosaic. Being the biggest player in a deeply entrenched payments oligopoly turns out to be fabulously lucrative.
Many casual observers often confuse Visa for a lender that extends credit to people who spend using credit cards adorned with its logo. What it actually does is co-ordinate a complex web of intermediaries that stand between buyers and sellers. The American firm now connects more than 61m merchants to 3.4bn Visa-branded cards, nearly one for every two people on Earth, issued mostly by...
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