InvestorPlace Editor Jeff Reeves, Visa
I’m taking a twist on this by embracing the idea of Apple as a disruptive innovator through technology. And just like the iPod disrupted music and e-books disrupted publishing, I can imagine Visa (NYSE:V) revolutionizing banking and how we pay for things — and see explosive growth as a result.
Right now, Visa actually is a technology company. It simple processes payments for retailers, connects debit cards to banks and skims a small fee off the top per transaction. It’s big business as the world moves away from cash and toward plastic. Visa has seen revenues soar almost 50% in the past three years, with 2008 revenues of $6.2 billion growing to $9.2 billion in fiscal 2011! Earnings have exploded from 96 cents a share to $5.16 in the same period.
The biggest growth area for Visa currently is this move away from cash and toward more plastic transactions. But Visa could see Apple-like growth when payments ultimately evolve beyond credit cards and to a true 21st-century banking world. How about banking with your smartphone by scanning checks with the camera or using a chip in the gadget register? Those technologies already exist — they just aren’t widely adopted. And perhaps most interesting of all, there’s nothing saying that traditional banks have to be the ones who ride these methods into widespread use.
Apple has proven how big in scale the consumer electronics revolution really is. There’s a chance that some consumers might not even need conventional brick-and-mortar banking anymore for a large part of their transactions — and a well-capitalized company like Visa (almost $3 billion in cash and short-term investments currently) with a dominant brand in payment processing has a very good shot at disrupting how consumers buy everything from groceries to gas to clothes at the mall.
Of course, Apple itself probably sees the potential of this market and could be developing its own mobile banking and payment infrastructure. But the trust consumers have in Visa-branded credit and debit cards could help this payment processor elbow to the front of the line if this market becomes a reality.