Visa 2008 Annual Report Download - page 69

Table of Contents
• As anticipated, volume and support incentives increased during fiscal 2008 due to a non-recurring charge in the second fiscal quarter related to a
customer agreement executed in the period, which increased volume and support incentives by $70 million.
• As further anticipated, the accounting impact of volume and support incentives assumed upon the restructuring of certain issuer programs in
fiscal 2007 increased volume and support incentives by $188 million.
• Additional increases in volume and support incentives reflect the impact of new contracts and higher payments volumes and number of
transactions processed.
The actual amount of volume and support incentives will vary based on modifications to performance expectations for these contracts, amendments to
contracts or new contracts.
Fiscal 2007 compared to Fiscal 2006
The increase in operating revenues during fiscal 2007 compared to fiscal 2006 primarily reflects a 9% increase in payments volume (exclusive of PIN-
based debit volume), and an 11% increase in transactions. Growth in operating revenues exceeded growth in payments and transactions volumes primarily due
to newly introduced service fees. While we believe that these changes in fee structure will generate ongoing benefits, we do 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.
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 $105 billion, or 9%, to $1.3 trillion in fiscal 2007. Service fees outpaced the growth in underlying payments volume due
primarily to the April 2007 introduction of new service fees. The increase in service fees from these new fees was 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 service 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 the 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.
International transaction fees
The increase in international transaction fees was primarily driven by cross-border payments volume, which increased by 15%, during fiscal 2007,
compared to fiscal 2006. The increase in international transaction fees was broadly in line with the growth in multi-currency payments volume, reflecting
more cross-border transactions as overall global travel has increased.
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