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Visa readies America's largest IPO
These days consumers are besieged by warnings of a potential credit crisis but it looks as though Visa Inc, the world's largest credit card operator, is unperturbed. Visa have the potential to raise up to $18.8 billion by floating 406 million shares of between $37 and $42 - and possibly a further 40.6 million shares depending on demand - in what will surely be the biggest American debut initial public offering.
MasterCard floated in May 2006; its shares have risen fivefold in that time and perhaps their success has encouraged Visa to take the plunge. However, Visa Europe (owned by 4,500 European banks) will not be following suit - it will continue to operate its business in Europe under licence from the US-based business.
Visa plans to allocate a sizable portion of the cash raised to pay for ongoing litigation against the company and to dedicate another chunk to buying some of the shares currently owned by big banks. Banks will retain half of the company and their stake will be a minority ownership, but the other half will be available to new shareholders. As a public company Visa would have the ability to free itself from bank control and take their payment processing business to wherever it appears that the big bucks are.
Visa is in this enviable position partly because it does not issue cards directly or even set the interest rates that borrowers pay, meaning that they are not directly exposed to potential pitfalls such as defaults or late payments.
Visa makes its money by charging merchants who accept its cards a small fee. They provide a world-wide service that guarantees that the transaction will be charged to the correct accounts, making it beneficial to both the merchant and the consumer. This means that Visa collects a fee on every transaction, but it is the issuing banks that carry any potential risks.
When you use a Visa card it is money from the issuing bank that you're using, so not all cards that carry the Visa name carry the same benefits - that's why it's sensible to compare credit cards and ensure that the cards you're considering carry all of the benefits you need.
Despite the widespread news coverage concerning credit crashes and crises, worldwide consumers continue to rely more on credit and debit cards than cash and cheques these days. People are moving towards plastic, even for small purchases such as fast food orders, and it seems as though the world is becoming increasingly cashless.
The Nilson Report, an industry tracker company, predict that the growing adaptation of cards in fast-expanding economies such as the Middle East and Asia will keep transaction volume rising at around 11% a year until 2012 and that by 2011, 55% of transactions in America will be cashless.
It seems that Visa is perfectly placed to cash in on the belief that the future will be plastic heavy and that credit cards are becoming increasingly integral to modern life.
Article Source: MxGet Article Directory
Author's Bio
Andrew Regan is an online, freelance author from Scotland. He is a keen rugby player and enjoys travelling.compare credit cards
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