Visa 2011 Annual Report Download - page 42

Table of Contents
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This management's discussion and analysis provides a review of the results of operations, financial condition and the liquidity and capital resources of
Visa Inc. and its subsidiaries ("Visa," "we," "our" and the "Company") on a historical basis and outlines the factors that have affected recent earnings, as
well as those factors that may affect future earnings. The following discussion and analysis should be read in conjunction with the consolidated financial
statements and related notes included in Item 8.
Overview
Visa is a global payments technology company that connects consumers, businesses, banks and governments around the world, enabling them to use
digital currency instead of checks and cash. We provide our clients with payment processing platforms that encompass consumer credit, debit, prepaid and
commercial payments. We facilitate global commerce through the transfer of value and information among financial institutions, merchants, consumers,
businesses and government entities. Each of these constituencies has played a key role in the ongoing worldwide migration from paper-based to electronic
forms of payment, and we believe that this transformation continues to yield significant growth opportunities, particularly outside the United States. We
continue to explore additional opportunities to enhance our competitive position by expanding the scope of payment services to benefit our existing clients
and to position Visa to serve more and different constituencies.
Overall economic conditions and regulatory environment. Our business is affected by overall economic conditions and consumer spending. Our
business performance during the year ended September 30, 2011, reflects the impacts of a modest global economic recovery.
The Reform Act. As of October 1, 2011, in accordance with the Reform Act, the Federal Reserve capped the maximum U.S. debit interchange
reimbursement fee assessed for cards issued by large financial institutions at twenty-one cents plus five basis points, before applying an interim fraud
adjustment up to an additional one cent. This amounted to a significant reduction from the average system-wide fees charged previously. The Federal Reserve
has also promulgated regulations requiring issuers to make at least two unaffiliated networks available for processing debit transactions on each debit card.
The rules also prohibit us and issuers from restricting a merchant's ability to direct the routing of electronic debit transactions over any of the networks that an
issuer has enabled to process those transactions.
We expect the interchange and exclusivity regulations, as well as the routing regulations, to have an adverse impact on our pricing, reduce the number
and volume of U.S. debit payments we process, and decrease associated revenues. A number of our clients may seek fee reductions or increased incentives
from us to offset their own lost revenue. Some have announced that they may reduce the number of debit cards they issue and reduce investments they make
in marketing and rewards programs. Some may impose new or higher fees on debit cards or demand deposit account relationships. Some may elect to issue
fewer cards enabled with Visa-affiliated networks. We expect many merchants to use the routing regulations to redirect transactions or steer cardholders to
other networks based on lowest cost or other factors. We expect operating revenue to grow in the high single to low double digit range for the full 2012 fiscal
year, and the pace of our U.S. revenue growth to begin regaining momentum in fiscal 2013.
Because we may have to re-examine and possibly renegotiate certain of our contracts to ensure that their terms comply with new regulations, these and
other clients will have the opportunity to seek to renegotiate terms relating to fees, incentives and routing. In some cases, we may lose placement completely
on issuers' debit cards.
We believe that we will be able to mitigate the negative impacts from the Reform Act to some extent through pricing modifications, and working with
our clients and other business partners to win
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