Visa 2007 Annual Report Download - page 78

Table of Contents
Investment Income
Investment income, net represents returns on our fixed-income securities and other investments.
Fiscal 2007 compared to Fiscal 2006
Operating Revenues
Operating revenues were $3.6 billion and $3.0 billion in fiscal 2007 and fiscal 2006, respectively, reflecting an increase of $0.6 billion, or 22%. The
increase in operating revenues reflects increases in service fees and data processing fees due to growth in payments volume, exclusive of PIN-based debit
volume, which increased 9%, and growth in transactions, which increased 11%. Growth in operating revenues exceeded growth in payments and transactions
volumes primarily due to newly introduced service fees. While Visa U.S.A. believes that these changes in fee structure will generate ongoing benefits, Visa
U.S.A. does not believe that the rate of growth in operating revenues is representative of sustainable future revenue growth because it includes the impacts in
fiscal 2007 of the new service fees.
Fiscal Year 2007 vs. 2006
2007 2006 $ Change % Change
(in millions, except percentages)
Service fees $ 1,945 $ 1,610 $ 335 21%
Data processing fees 1,416 1,248 168 13%
Volume and support incentives (505) (588) 83 (14)%
International transaction fees 454 398 56 14%
Other revenues 280 280 — 0%
Total Operating Revenues $ 3,590 $ 2,948 $ 642 22%
Service Fees
Payments volume on Visa-branded cards for goods and services in the preceding quarter, exclusive of PIN-based debit volume, is the basis for service
fees. Payments volume, exclusive of PIN-based debit volume, increased $105 billion, or 9%, to $1.3 trillion in fiscal 2007 compared to fiscal 2006. Service
fees outpaced the growth in underlying payments volume due primarily to the April 2007 introduction of two new acceptance fees including a debit
acceptance fee on all consumer debit payments volume and a credit/commercial acceptance fee on all consumer credit and commercial payments volume. The
increase in service fees from these new acceptance fees were offset by the corresponding elimination of previously existing issuer fees used to support
merchant acceptance and volume growth initiatives. The net impact of the new acceptance fees and the elimination of the existing issuer fees resulted in an
increase to service fees of $190 million, or 12%, in fiscal 2007 compared to fiscal 2006.
Data Processing Fees
The increase in data processing fees is primarily due to the growth in number of transactions processed during fiscal 2007 compared to fiscal 2006.
Data processing fees increased 13%, broadly consistent with the growth in underlying transactions processed. Incremental revenues during fiscal 2007 from
the introduction of an updated fraud detection product and additional revenues from Visa U.S.A.'s debit processing services related to non-Visa network
transactions offset the continued impact of higher volume-based discounts resulting from consolidation and transaction growth among customers. Of the total
data processing fees, $122 million, or 9%, was collectively earned from Visa International, Visa Canada and Visa Europe in each of fiscal 2007 and fiscal
2006.
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