Visa 2007 Annual Report Download - page 75

Table of Contents
interest rates and fees paid by consumers and commercial establishments, and most other competitive card features. Nor does Visa U.S.A. earn revenues from
the fees that merchants are charged for card acceptance, including the merchant discount rate. Acquiring customers, which are generally responsible for
soliciting merchants, establish and earn these fees.
Service Fees
Service fees primarily reflect payments by customers for their participation in card programs carrying marks of the Visa brand. Current quarter service
fees are assessed using a calculation of pricing applied to prior quarter payments volume as reported on customer quarterly operating certificates, exclusive of
PIN-based debit volume. These payments volumes also do not include cash disbursements obtained with Visa-branded cards, balance transfers or convenience
checks.
Also included in service fees are acceptance fees which are used to support merchant acceptance and ongoing volume growth initiatives. Two new
acceptance fees were introduced in April 2007, which apply to all consumer debit payments volume and all consumer credit and commercial payments
volume. These fees supersede previously existing issuer programs. Prior period revenues associated with previously existing issuer fees have been reclassified
from other revenues to this category for comparative purposes in Visa U.S.A.'s consolidated financial statements for fiscal 2006 and fiscal 2005.
Data Processing Fees
Visa U.S.A. operates a proprietary network, VisaNet, a proprietary, secure, centralized processing platform which provides transaction processing and
other payment services linking issuers and acquirers. Processing services are provided through Visa U.S.A.'s majority-owned subsidiary, Inovant, which
operates VisaNet. Visa U.S.A. also provides processing services to Visa International, Visa Canada and Visa Europe, in accordance with service agreements
with these entities. Data processing fees are based on information Visa U.S.A. accumulates from VisaNet. Data processing fees are recognized as revenue in
the same period the related transaction occurs or services are rendered.
Data processing fees are primarily driven by the number and type of transactions and represent fees for processing transactions that facilitate the
following services:
• Authorization. Fees to route authorization requests to the issuer when a merchant, through its acquirer, requests approval of a cardholder's transaction;
• Clearing and settlement. Fees for determining and transferring transaction amounts due between acquirers and issuers;
• Single Message System, or SMS, switching. Fees for use of the SMS for determining and transferring debit transaction amounts due between acquirers
and issuers;
• Member processing. Fees for use of the Debit Processing Service, which provides processing and support for Visa debit products and services;
• Processing guarantee. Fees charged for network operations and maintenance necessary for ongoing system availability; and
• Other products and services. Fees for miscellaneous services that facilitate transaction and information management among Visa U.S.A.'s customers.
Volume and Support Incentives
Volume and support incentives are contracts with financial institutions, merchants and other business partners for various programs designed to build
payments volume, increase card issuance and product acceptance
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