Short Blog

Visa held their Investor Day last week on Feb 20, and I encourage everyone to read through the presentations. Most of you know my strong network bias, V/MA are my top personal holdings. I’m not a financial analyst; my investment hypothesis rests on the strategic need for card networks and their sustainable advantage in meeting those needs. 

Let me provide my top 7 reasons why I am so firmly behind the networks, with references to investor day content and my previous blogs.

1. Card networks unlock the power of banking (blog). Visa’s success is based on banks’ need to connect to other banks and merchants. Each Issuing bank has a unique ability to manage risk, comply with regulations, and create trust. While banks are the steam engines and merchants are the freight cars, Visa provides the tracks and manages who gets to ride them. 
2. The card economic model powers shared investment, backed by active governance, standards and fault-tolerant operations (blog). To compete against Visa, you have to build a better payment system with better economics that overcomes the shared investment of all stakeholders. Open standards are a great technology model but a terrible business one, as commercial exchange requires risk management and a clear definition of terms. Blanket law and mandated payment schemes may create compliance requirements, but they do not provide the incentives to assume risk and invest.  
3. Competition (blog). Card Networks externalize bank services and compete against 1) Open Standards and 2) Regulatory Mandates. These competitors operate with inferior economics and shared investment.  In Europe for example, IFR removed economics for competitors to invest, locking in existing investment and reducing the friction with merchants. SEPA became an alternative network with no benefits to consumer, merchant or bank.  Obviously Visa GDV increases when interchange goes down, but their revenue also increases due to increased VAS. See proof point below. 
4. Network of Networks. Multi-party collaboration requires multi-lateral agreements that define roles, rules, governance and other terms necessary for operation. Card networks are the best place to deliver this collaboration platform, particularly when a bank is involved in managing risk. We are entering a world of many more specialized networks. Visa announced that it is unbundling Visa products to create Visa as a service. Visa as a Service will leverage existing infrastructure network scale to 1) simplify how existing participants compete and collaborate in other networks and 2) allow new specialized networks to leverage network services and innovations. Also, see the blog on Collaborative Networks (2024).
5. Room to Grow. In every category, from consumer to commercial to VA, S, this network is just now hitting its stride. I was recently at a BigTech with a few payment experts. Given the vast array of payment start-ups and national schemes in Europe, they assumed that V/MA was declining. I told them, “Not at all; they are accelerating,” to which they were incredulous. Visa provided a great Nordic proof point at Investor Day (discussion below).
6. Visa and Mastercard are the identity infrastructure of the internet (blog), powered by Issuers and enforced through a vast array of agreements and services. They transform anonymous nodes into known parties capable of transacting.  Identity, Authentication and Authorization are going to transform commerce. From enabling agentic commerce to government issued digital IDs, the card network’s leadership position will be maintained.  Just as Visa and Mastercard created an economic model for the bundle of payments and identity, the unbundling of identity and authentication will see a new economic model that could dwarf payments (blog).
7. Card Networks don’t pick winners. They encourage investment in the network. In my view, the biggest (and only) threat to Visa and Mastercard is issued investments. See Winning in Network of Networks (2025). 

1 – Cards Unlock the Power of Banking

The Power of Bank Networks is a long blog that covers this topic (which I won’t rehash).  The economic model of Visa enables billions of dollars of shared investment by all stakeholders. To compete against Visa you not only have to build a better payment system, with better economics that overcome the shared investment of all stakeholders.

The network effects of Visa demonstrate increased momentum, growth and pricing power. This network is still in its growth stage, with many market opportunities still untapped. 

Ryan presented

Visa CFO Chris Suh presented.

ECB 2021 Payment Stats provided this graph

2 – Card Economic Model

I covered this topic in Changing Economics of Payments. To summarize

• Card networks are highly efficient, with network fees of 5-7 bps 
• Don’t look at the success of Visa in isolation. Look at the success of every company that has a payments business and their dependency on V/MA: Stripe, Block, Adyen, Chime, FIS, Issuers, Merchants, Apple. 
• Pricing, Rule Setting, Governance, Control and VAS. While these are all friction points with other stakeholders, there is no dispute that networks are in the dominant position in all of the above. The best example is Europe’s 2015 Interchange Fee Regulation (IFR). It was an attempt to “kill” V/MA. What resulted was an explosion of growth. See Interchange goes to 0 .. So What?
•  As I outlined in Pay by Bank and this ECB Study, the impact of IFR resulted in cementing cards as the dominant form of payment in Europe and crushed hopes of competing schemes as the margin collapsed. Visa/MA revenue INCREASED as a result of IFR.

Jack Forestal addressed it in this slide, proving that Visa is growing volume above baseline consumer spending in markets with strong domestic networks. Important to note this does not begin to account for VAS growth (or commercial volume).

If there were two areas I would have liked Visa to cover in the economic model it would be:

1. The “value” created by all other Visa stakeholders. This could be net revenue from Issuers, MSPs, and Specialists. To understand the momentum and advantages of Visa, you must understand how other stakeholders “WIN” when Visa wins. 
2. Incentive Spend. The incentive line and marketing offsets are key tools for network negotiations. It would have been good to hear where these are going. 

3 – Competition

Networks externalize bank services through a common interface AND an economic model that provides for active governance and operation. Visa and Mastercard have become the identity infrastructure for the internet, enabled by Issuers. There are no unknown parties within the card (and banking) networks.  Can a government-issued digital ID disrupt this? Perhaps, but only if banks don’t continue to invest in card networks to maintain their advantage. Banks not only convey trust, they manage risk. See Pay By Bank and Separating Payment from Identity. 

Who else can do all of this? In one of my favorite slides, Oliver Jenkins gave details on the Nordics, one of the most advanced banking and payments markets in the world. Here, Visa is growing revenue at 15% CAGR with a vast array of partners. You can see the future of Visa as a Service in the Nordics as Issuers, MSPs and Merchants leverage existing card network investments for new schemes, products and services.

4 – Network of Networks

I’m still exhausted from my long post on this topic last year in Winning in Network of Networks (2024). Visa has expanded its vision in this area with Visa as a Service.  By unbundling visa services from cards, they have expanded their ability to create VAS in other networks. 

Multi-party collaboration requires a network and governance. We are entering a world of many more networks, and Visa is best positioned as a network of networks. As I’ve discussed in my TCE blogs, transaction costs, data economies of scale, and virtuous cycles led to the dominance of the large centralized champions: Google, Meta, Amazon, …etc. In PC architecture, IAL served as the standards and compliance body for thousands of specialist OEMs, and Microsoft provided the OS to make it all work together.  Similarly, today, Visa provides both the “OS” and the standards for the most important phase of commerce – the payment.

5 – Room to Grow

There is substantial headroom in all 3 of Visa’s core opportunities

1. Consumer Payments
2. Commercial Payments
3. VAS

A common investor concern last week was that Visa has underperformed in VAS. My firm belief is that Visa will benefit from being a late follower here, as identity and authentication drive a generational change in eCommerce and associated VAS. 

Because Visa has few assets to protect here, they are much better partners and more likely to jump ahead (through partnerships) in many new areas of VAS and Agentic Commerce.

OK.. this has gotten a little long, and the last two have been discussed in many of my blogs. Open to comments and feedback. 

Congratulations to Visa on a great investor day, well done.