Visa’s (V) stock tumbled 4.7% at market close yesterday after Amazon (AMZN) threatened to limit its ties with the electronic payments giant over the latter’s transaction processing fees hike.
Visa’s exorbitant fee hike led Amazon to announce that it will not accept payments on transactions from Visa credit cards issued in the U.K., starting from January 19, 2022. “The cost of accepting card payments continues to be an obstacle for businesses striving to provide the best prices for customers,” a spokesperson for Amazon told Bloomberg. Moreover, the high fee is resulting in inflated prices for online shoppers.
It seems that Visa’s timing to hike its fees was wrong and came at a time when inflation is looming on the global economy.
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What This Setback Means for Visa
As a global payments leader with numerous key partnerships, Amazon’s payment transactions using its U.K.-issued credit cards make up a very small part of its global transaction volume. Therefore, the limit issued by Amazon is not likely to weigh heavily on the company’s top-line or profitability.
Baird analyst David Koning, who maintains a Buy rating on Visa, believes that the closure of Visa’s business from its U.K. credit cards on Amazon’s platform won’t have any credible impact on Visa’s yields due to the fact that shoppers on Amazon can still use Visa debit cards, which will likely compensate for the loss. Moreover, he estimates Visa’s business from the U.K. to account for only about 6% of its global yield, a fraction of which comes from purchases on Amazon.
Nonetheless, Amazon’s stand against growing processing fees by payments partners represents a milestone in the world of retailers. For a long time now, the high fees by payment companies have been notorious for slimming down the profit margins of retailers. Therefore, it may be worrisome for Visa if Amazon’s step becomes a trailblazer and other enterprises follow suit.
Moreover, this stand may make Visa think twice before making any more fee hikes, as that might meet with serious objection globally.
Visa Website Traffic Falls
A key measure of a company’s popularity is the number of visits to its website. Being a digital payments company, we can safely say that traffic to Visa’s website may give us a fair idea of how the company is doing in the eyes of consumers.
TipRanks’ new Website Traffic tool, which sources its data from Semrush (SEMR), helped us see the website traffic volume and trends for Visa.
As we delved into the data, we saw that so far into Q4, the consolidated virtual visits to Visa’s website seem to be going downhill. Moreover, at the end of Q3, total estimated visits to the website from all devices have declined 9.51% sequentially.
Furthermore, when we looked at the quarter-to-date period of last year and compared it with the quarter-to-date period of this year, we saw a 20.72% drop in total estimated visits to Visa’s website. Additionally, total estimated visits on a year-to-date basis have declined 5.29% from last year’s corresponding period.
This may be an indication of Visa’s falling popularity among the growing inflow of new entrants into the digital payments market. Also, Visa’s higher transaction fees might also have a hand in enterprises looking for other payment options.
Wall Street’s Take
Turning to Wall Street, it looks like this temporary turmoil has not affected the experts’ stance on Visa’s prospects. The analyst consensus is strongly positive about Visa, with a Strong Buy rating based on 13 Unanimous Buys. The average Visa price target of $276.77 indicates an upside potential of 34.97%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
