Visa’s Worst Nightmare: Smarter Bankers

A new analyst report sent Visa shares tumbling almost one percent late last week, after the analyst group said it expected much tougher negotiations between banks and Visa regarding Visa-branded credit cards. “Many of the larger international banks are becoming better educated and much tougher negotiators,” said the analysts at Raymond James, according to a MarketWatch report.

The analyst report said at issue are various incentives to expand transaction volume, card issuance and deal acceptance. “Visa’s management has already indicated that incentives as a percentage of total growth revenue will top 19 percent in the current quarter. Raymond James had seen that figure at 18 percent for the next fiscal year and said headwinds could come if incentives were to remain at the higher figure. In our opinion, the company could face less favorable pricing or higher incentives (contra-revenues) in futures years,” the Raymond James analysts added, according to MarketWatch.

Although this is just one factor impacting Visa’s stock price, bank pushback is hardly trivial to Visa. “Five analysts rate Visa shares as hold, compared with 25 who call it a buy and two who recommend an overweight position, according to FactSet,” MarketWatch said. “Visa shares are down 3.5 percent so far this year, hurt in part by a disappointing outlook that accompanied third-quarter results, compared with a 3 percent gain in the Dow Jones Industrial Average.”