Mau CrlmLh, ClA [MauCCrlmLh ulsclalmer 1he daLa ln Lhls presenLauon has been obLalned from sources belleved Lo be rellable, buL accuracy and compleLeness are noL guaranLeed. 1he presenLauon has been prepared solely for lnformauve purposes and ls made avallable on an "as ls" basls.
no represenLauon or warranLy, express or lmplled, ls made as Lo Lhe falrness, accuracy, compleLeness, reasonableness, or correcLness of Lhe lnformauon, oplnlons, or concluslons conLalned ln Lhls presenLauon. lorecasLs, prospecLs or reLurns are by Lhelr naLure sub[ecL Lo slgnlcanL uncerLalnues and conungencles.
noLhlng ln Lhls presenLauon ls lnLended Lo consuLuLe legal, Lax, securlues, or lnvesLmenL advlce, nor an oplnlon regardlng Lhe approprlaLeness of any lnvesLmenL, nor a sollclLauon of any Lype. 1hls presenLauon has been prepared wlLhouL Laklng lnLo accounL Lhe lnvesLmenL ob[ecuves, nanclal slLuauon or parucular needs of any parucular person or enuLy. 1he conLenLs ln Lhls presenLauon are lnLended for general lnformauonal purposes only and should noL be acLed upon wlLhouL obLalnlng speclc legal, Lax, and lnvesLmenL advlce from a llcensed professlonal concernlng your own slLuauon and any speclc lnvesLmenL quesuons you may have. asL performance ls no guaranLee of fuLure performance. AcLual fuLure evenLs may vary from Lhese forecasLs and you are cauuoned noL Lo place undue rellance on any forward looklng sLaLemenL.
1he vlews or oplnlons presenLed are solely Lhose of Lhe auLhor and do noL reecL Lhe vlews or oplnlons of any oLher person or enuLy. lL's far beuer Lo buy a wonderful company aL a falr prlce Lhan a falr company aL a wonderful prlce." - !"#$%&'#" )*+&*,*- .&*#"&/01"#% 2"3"#4 5676
1here ls value ln growLh." - vlLally kaLsenelson4 892:;< 8*'0 =>5=
vlsa's 8uslness never lnvesL ln any ldea LhaL you cannoL lllusLraLe wlLh a crayon." - eLer Lynch, !"*?@A +&" .+#""+ 1) Cardholder makes purchase 2) MerchanL LransmlLs Lransacuon Lo acqulrlng bank 3) Acqulrer rouLes Lransacuon over vlsa's neLwork Lo lssulng bank
4) lssulng bank auLhorlzes Lransacuon 3) MerchanL submlLs nal Lransacuon daLa Lo vlsa for seulemenL 6) lunds Lransferred beLween cardholder's accounL Lo Lhe merchanL's accounL
1 Ad[usLed Lo exclude Lhe 2012 merchanL seulemenL expense vlsa's SLraLegy lncrease share of elecLronlc paymenLs as a percenLage of global personal consumpuon expense (CL) Crow revenue sLreams ouLslde of Lhe uS Lo greaLer Lhan 30 of LoLal revenue lncrease share of Lransacuons processed on vlsaneL lnvesL ln new buslnesses LhaL provlde addluonal value Lo cusLomers ln paymenL ecosysLem and drlve revenue growLh
Source: vlsa 2013 lnvesLor uay resenLauon
Clobal Converslon Lo LlecLronlc aymenLs vlsa 2012 volume: $6.41 and 28 share of $231 markeL (excludlng Lurope) $111 cash converslon opporLunlLy wlLh Lhe same share and moneuzauon raLe represenLs a poLenual revenue lncrease of 33 - solely from Lhe shl Lo elecLronlc paymenLs Source: vlsa 2013 lnvesLor uay resenLauon and SLC llngs
8lsk of uecllnlng CL? 79 of uS CL ls non- dlscreuonary uS Cu per caplLa ls Lhe 12 Lh hlghesL ln Lhe world, whlch lndlcaLes a level of dlscreuonary lncome above average levels CL looks very much llke recurrlng revenue
79 Source: 8LA, World 8ank
SusLalnable Compeuuve AdvanLage ueep lnLegrauon wlLh all members of paymenL ecosysLem Consumers - 2.18 cards lssued When banks swlLch neLworks on Lhelr card poruollos, card relssuance can lead Lo cusLomer aurluon of 10-13 8elssuance ls operauonally complex and cosLly MerchanLs - 36MM locauons accepung vlsa cards globally Large number of cardholders ensures LhaL merchanLs have lncenuve Lo accepL vlsa 8anks - 8elauonshlps wlLh 13,000 nanclal lnsuLuuons 1ransacuons - 828 Lransacuons ln C? 2012 knowledge of cusLomers and Lhelr Lransacuons allows vlsa Lo provlde value- add servlces Lo merchanLs and lssuers LhaL new enLranLs cannoL (fraud avoldance, enhance volumes) Source: vlsa 2013 lnvesLor uay resenLauon and SLC llngs
SusLalnable Compeuuve AdvanLage vlsa has advanLages relauve Lo lLs few global compeuLors MasLerCard MasLerCard's Lransacuon counL and paymenL volume are 37 and 67 of vlsa's respecuvely MasLerCard needs Lo dlerenuaLe on boLh prlce and servlce level Lo wln capuve buslness from vlsa and galn share CpuonallLy from vlsa Lurope (more on Lhls laLer.) Amerlcan Lxpress Closed-loop sysLem where Amerlcan Lxpress acLs as acqulrer, neLwork, and lssuer More dlrecLly exposed Lo regulaLory rlsk as 60 of revenue comes from lnLerchange fees CrowLh opporLunlues llmlLed Lo cardholders who are credlL-worLhy Chlna unlonay unllkely non-Chlnese lssulng banks wlll choose Lo lssue a Chlna unlonay card ConsequenLly Chlna unlonay ls focused on markeLs where Chlnese cluzens Lravel Source: vlsa, MasLerCard, and Amerlcan Lxpress SLC llngs
SusLalnable Compeuuve AdvanLage 8epllcauon of neLwork nearly lmposslble 8llllons of dollars aL rlsk - new enLranL would need slgnlcanL backlng Lo bulld scale and galn condence of Lhe merchanLs and banks 1he paymenL sysLem ls hlghly regulaLed - new enLranLs would need Lo be adepL aL lnLerfaclng wlLh regulaLory agencles globally lew lssuers have Lhe volume and global presence necessary Lo eecuvely clrcumvenL exlsung neLworks Cnce a neLwork ls bullL, Lhe hurdle would Lhen become bulldlng scale (lssulng cards, addlng accepLance locauons, drlvlng neLwork volumes, eLc.) MosL 8ecenL uemonsLrauon. "We expecL LhaL Lhe acuons we are Laklng wlll calm Lhe slLuauon wlLh vlsa and MasLerCard," he sald. "We wlll do everyLhlng Lo make sure Lhey keep Lhelr acuvlues here." - 8usslan 1 sL uepuLy M lgor Shuvalov - !une 18 Lh , 2014 hup://nance.yahoo.com/news/russla-reduce-collaLeral-paymenLs-masLercard-134733893.hLml
Acqulsluons and lnnovauon vlsa has a hlsLory of uslng cash boLh Lo develop enhanced paymenL Lechnology ln-house (payWave - nlC, v.me - elecLronlc walleL) and acqulre companles lnnovaung ln moblle (lundamo) and merchanL servlces (CyberSource) uo vlsa roducLs Add value for CusLomers? 1he numbers lndlcaLe Lhey do. ln 2008, every $670 of volume led Lo $1 of vlsa revenue. 8y 2013 LhaL rauo decllned Lo $370 of volume for every $1 of revenue. 1hls shows LhaL merchanLs and lssuers are wllllng Lo pay for Lhe producLs and servlces vlsa oers 8evenue has grown by 14 annuallzed and LS by 49 annuallzed slnce 2008 Source: vlsa SLC llngs
vlsa Lurope vlsa Lurope ls sull owned by a consoruum of banks and has Lhe ablllLy Lo puL Lhe company Lo vlsa lnc. aL any ume 8egulaLory pressure on banks and hlgher caplLal requlremenLs would make proceeds from vlsa Lurope Lransacuon auracuve Lo currenL ownershlp vlsa Lurope currenLly noL run Lo generaLe a proL and prlces servlces aL a below-markeL level CurrenL vlsa Lurope markeL envlronmenL mlmlcs vlsa lnc. pre-lC Slnce 2007 (pre-lC), vlsa lnc. has revenue CAC8 of 22 Slnce Lhe 2008 lC, LS has lncreased from $1.04 Lo $7.39 8oLh of Lhese resulLs occurred durlng Lhe posL-ClC perlod (pressure on consumer spendlng, lncreased caplLal requlremenLs for banks, lncreased regulauon) vlsa lnc. would llkely be Lhe beneclary of a shl Lo markeL prlclng and any poLenual fuLure growLh Source: vlsa SLC llngs
Looklng forward @'A 6$$39B0*.$ Conservauve - ~6 revenue/CL growLh (noL facLorlng lncreased share from cash paymenL converslon), lncenuves (conLra-revenue lLem) golng from 16.8 Lo 19 of gross revenue Plgh CrowLh - lncremenLal 8 revenue growLh from cash paymenL share galn, lncenuves golng from 17.1 Lo 18.4 of gross revenue vlsa Lurope - $88 prlce, nance 100 wlLh debL (A raung), achleves vlsa lnc. marglns, 22 CAC8 ln revenue (slmllar Lo vlsa lnc. experlence posL-lC) unfavorable 8esulLs - 8evenue growLh of 3 (loslng share Lo compeuLors as paymenLs shl from cash), operaung marglns from 62 Lo 30, lncenuves from 17 Lo 23 of gross revenue Source: vlsa SLC llngs for 2013, l8Lu, 2014 and forward are esumaLes - see dlsclalmer
oLenual negauve CuLcomes lrrauonal compeuuon from MasLerCard (less llkely as lL ls a for-proL enuLy) or Chlna unlonay LhaL Lakes share from vlsa unfavorable shl ln Lhe regulaLory envlronmenL globally leadlng Lo lncreased operaung cosL or reduced revenue MandaLes from forelgn governmenLs Lo rouLe Lransacuons over domesuc paymenL neLworks llmlung vlsa's ablllLy Lo Lake share as paymenLs move from cash Lo elecLronlc SlgnlcanL legal [udgmenL(s) depleung shareholder equlLy and alLerlng compeuuve envlronmenL AlLernauve neLworks/meLhods of auLhorlzauon and clearlng LhaL erode Lhe value of vlsa's neLwork 8lsk ls whaL's le over when you Lhlnk you've LhoughL of everyLhlng." - Carl 8lchards4 B&" !"&*C'/# D*E Summary 1here ls a global shl occurrlng Lowards elecLronlc paymenLs and away from cash and paper-based paymenLs ersonal consumpuon expense (CL) ls growlng, parucularly ln emerglng markeLs, and a slgnlcanL poruon of CL ls non- dlscreuonary vlsa demonsLraLes Lhe characLerlsucs of a company wlLh a susLalnable compeuuve advanLage l belleve Lhese facLors lndlcaLe Lhe range of ouLcomes for vlsa ls posluvely skewed. under favorable clrcumsLances, Lhere ls Lhe poLenual for earnlngs Lo compound by more Lhan 13 annually over 3 years.