Visa 2008 Annual Report Download - page 57

Table of Contents
Results of Operations
Operating Revenues and Expenses
Operating Revenues
Our operating revenues consist of gross operating revenues reduced by payments made to customers and merchants under volume and support incentive
arrangements. Gross operating revenues consist of service fees, data processing fees, international transaction fees and other revenues. Our operating revenues
are primarily generated from fees calculated on the payments volume of activity on Visa-branded cards, which we refer to as service fees, and from the fees
charged for providing transaction processing, which we refer to as data processing fees. Payments volume is reported by our customers and transactional
information is accumulated by our transaction processing systems. Historically, pricing has varied among our different geographies because geographies
outside the United States had operated under an association business model with distinct, autonomous strategies, boards of directors and management teams.
In 2007, geographies outside the United States began the transition to a business model seeking to increase profitability and made competitive increases in
their pricing structure. Further competitive pricing changes were made during fiscal 2008 and we will continue to assess opportunities for competitive
adjustments that align with the value and growth opportunities provided to our customers.
We do not earn revenues from, or bear credit risk with respect to, interest and fees paid by cardholders on Visa-branded cards. Our issuing customers
have the responsibility for issuing cards and determining interest rates and fees paid by cardholders, and most other competitive card features. Nor do we earn
revenues from the fees that merchants are charged for card acceptance, including the merchant discount rate. Our acquiring customers, which are generally
responsible for soliciting merchants, establish and earn these fees.
The following sets forth the components of our operating revenues:
Service fees
Service fees reflect payments by customers for their participation in card programs carrying our brands. Service fees are primarily calculated on the
payments volume of products carrying the Visa brand. We rely on our customers to report payments volume to us. Service fees in a given quarter are assessed
based on payments volume in the prior quarter, excluding PIN-based debit volume. Therefore, service fees reported with respect to the 12 months ended
September 30, 2008, were based on payments volumes reported by our customers for the 12 months ended June 30, 2008. Furthermore, pro forma service fees
for the twelve months ended September 30, 2007 were based on payments volumes reported by our customers for the twelve months ended June 30, 2007.
These actual and pro forma payments volumes also do not include cash disbursements obtained with Visa-branded cards, balance transfers or convenience
checks, which we refer to as cash volume. New service fees were introduced in April 2007, which apply to U.S. consumer debit, consumer credit and
commercial payments volume. These fees supersede previously existing issuer programs.
Data processing fees
Data processing fees consist of fees charged to customers for providing transaction processing and other payment services, including processing
services provided under our bilateral services agreement with Visa Europe. Data processing fees are based on information we accumulate from VisaNet, our
secure, centralized, global processing platform, which provides transaction processing services linking issuers and acquirers. Data processing fees are
recognized as revenues in the same period the related transaction occurs or services are rendered.
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