The payment processing space is changing rapidly as new technology threatens to completely overhaul the way people buy things in the very near future. While credit card company Visa Inc (NYSE:V) still operates one of the most popular payment networks, there are several obstacles ahead.
Newer entrants such as Apple Inc. (NASDAQ:AAPL) and PayPal Holdings Inc (NASDAQ:PYPL) give V a run for its money. All of this and more is likely to be addressed on Monday after the bell when Visa releases its fourth-quarter earnings.
Visa’s New CEO
Visa is expected to report earnings per share of 73 cents, but investors’ focus is likely to be on the company’s future. One week before the earnings were due to be released, Visa CEO Charlie Scharf announced plans to step down. Scharf will be replaced by Alfred F. Kelly Jr, a former American Express Company (NYSE:AXP) exec.
The CEO switch-up took many by surprise, especially with an earnings announcement so close at hand. Some are questioning whether or not Scharf’s decision to leave, which he said was due to family commitments, is a signal of choppy waters ahead for Visa.
Scharf is leaving behind a host of legal troubles, including a battle with retailers over credit and debit card fees and a disagreement with discount superstore Wal-Mart Stores, Inc. (NYSE:WMT) over PIN verifications.
These issues are just scratching the surface of what could be to come for Visa, as regulations regarding global payment processing are growing more restrictive as the space develops. As one of the largest players in this industry, V will probably feel the brunt of a regulatory clampdown, so such a scenario is worrying for Visa stockholders.
However, incoming CEO Kelly doesn’t appear to be interested in changing Visa’s course and his entrance may not be much of a shakeup after all. Not only has he been privy to Visa’s ups and downs over the past two years, thanks to his seat on Visa’s board of directors, but he assured investors that he wasn’t planning to make any big changes in an interview with Reuters.
Many are hoping to hear more on exactly how and when this transition will take place on Monday’s earnings call.
Europe Problems
One of the highlights of Visa’s third-quarter earnings call was the company’s recent acquisition of Visa Europe, which brought an additional $6.8 trillion worth of global payments under the V umbrella. However, the merger took place just days before the Brexit vote, leaving the deal marred with uncertainty over Visa Europe’s performance moving forward.
Now that the UK has begun to negotiate trade agreements, investors will be eager to see how Visa plans to deal with European headwinds. Some worry that the Visa Europe acquisition may not be as advantageous as once believed now that trade across the continent is facing major hurdles.
Mobile Payments
There’s no question that the payment processing space is leaning more toward mobile transactions, and Visa has been careful not to overlook this trend. While credit and debit transactions are still wildly popular at the moment, it may not be long before paying with your phone becomes the new norm.
For that reason, Visa has been working to strike deals with rivals such as PayPal to ensure that it remains relevant moving forward. The partnership has been touted as a win for Visa, largely because it removed a major competitor and moved some of PayPal’s transactions onto the Visa network.
Another big focal point of Monday’s earnings will be Visa’s financial strength. The company announced on Tuesday that it would raise its quarterly dividend by 18%.
This sent a strong message that finances are on solid ground, so traders will be looking for the company’s fourth-quarter earnings to confirm that.
As of this writing, Laura Hoy was long AAPL stock.
