Visa 2008 Annual Report Download - page 62

Table of Contents
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 increased $388.3 billion, or 17%, to $2.7 trillion for the twelve months ended June 30, 2008, compared to the prior year comparable
period. Growth in service fees outpaced the growth in underlying payments volume due primarily to new service fees introduced in April 2007 which
superseded previously existing arrangements with issuers. The new fees increased service fee revenue by $131 million, or 5%, in fiscal 2008. As noted above,
our rate of future revenue growth may be impacted by ongoing consolidation in the financial sector. We also expect that current turbulence in the financial
and credit markets will moderate discretionary spending, and the rate of payments volume growth, in the near term.
Data processing fees
The increase in data processing fees reflects 13% growth in the number of transactions processed. We processed 37.0 billion transactions during fiscal
2008, compared to 32.8 billion in fiscal 2007. Growth in data processing fees outpaced the growth in underlying transaction volumes primarily due to new
services and various pricing modifications both inside and outside the United States which collectively increased data processing fees by 7%. Certain of the
data processing pricing modifications took place following the beginning of the third quarter of the prior fiscal year resulting in revenues which continued to
grow at a faster rate than transactions. The pricing increases outside the United States reflect transition to a business model seeking to increase profitability.
While we believe these pricing changes will generate ongoing benefits, we do not believe that the rate of growth in data processing fees is representative of
sustainable future revenue growth because it includes the impacts of these changes in pricing. As noted above, our rate of future revenue growth may be
impacted by ongoing consolidation in the financial sector. We also expect that current turbulence in the financial and credit markets will moderate
discretionary spending, and the rate of payments volume and transaction growth, in the near term.
International transaction fees
The increase in international transaction fees was primarily driven by cross-border payments volume, which experienced double digit growth, reflecting
more cross-border transactions and the continued expansion in the use of electronic payments for travel purposes. During fiscal 2008, growth in international
transaction fees outpaced the increase in cross-border payments volume primarily due to modifications to pricing structures for certain international
transactions in the United States in April 2008, as well as pricing increases outside the United States which took place in all geographical regions during the
first half of fiscal 2007 as our businesses outside the United States transitioned to a business model seeking to increase profitability. While we believe the
pricing modifications will generate ongoing benefits, we do not believe that the rate of growth in international transaction fees is representative of sustainable
future revenue growth because it includes the impacts of these changes in pricing. Growth in international transaction fees also reflects the positive impact of
the weak U.S. dollar throughout most of fiscal 2008. As noted above, we expect that current worldwide turbulence in the financial and credit markets will
moderate discretionary spending, and the rate of cross-border business and leisure travel, in the near term. The impact of this trend on our revenues could be
amplified should the current strengthening of the U.S. dollar continue.
Other revenues
The increase in other revenues was primarily driven by growth in fees related to the Visa Extras loyalty platform in which enrolled Visa cardholders
earn reward points toward qualifying purchases. Visa earns revenues from its financial service institution customers for administrative and rewards
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