Visa Inc (NYSE:V) Plays to the Demand for Prepaid Cards in Developing Countries

March 17, 2016

George Stark, President and CEO of Stark Capital Management, says that while Visa Inc (NYSE:V) has the potential to see more growth domestically as the economy continues to expand, the more interesting opportunity is in the developing world.

[Visa] is a still a very high-growth business. The credit card business in the United States is much more mature, although it obviously has the potential for a cyclical recovery given that consumer spending could improve as the economy continues to expand and the percentage of consumer debt, which declined dramatically in the post-crisis era, the last few years has begun to slowly creep up again.

What is really appealing to the Visa story, as well as to MasterCard (NYSE:MA), but Visa has been the one that we have chosen to play for some time, is the fact that in many parts of the world, consumers, workers do not have access to banking. They cannot open bank accounts, and they cannot get checking accounts, but employers can pay them with these prepaid cards, which for security reasons protects them from having their money stolen and expands, if you will, the role of credit cards into a payment system for individuals that in a sense supplants the use of checking accounts.

And so in the developing world, we’re finding the demand for the credit cards and prepaid cards both for telephones and telecommunications as well as for payments for salaries and for household goods has skyrocketed. And the reason is the ability of employers to protect their employees and pay them with these credit cards. So we think that will continue to be a high-growth area for Visa, and it really goes well beyond what’s happening in the more developed countries, in the United States and Europe.

George Stark