Surge In Debit Charges Visa

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SAN FRANCISCO – In a big boon for credit unions, Visa reported yesterday that a 15% rise in transactions, led by growth in debit, fueled a 16% increase in earnings for its fiscal first quarter.

The cards giant reported first quarter profits of $884 million on a 14% rise in revenues.

Visa’s first quarter earnings are the latest indicator of the stakes involved in the Federal Reserve’s price-setting for debit interchange, as the company reported a 16% surge in debit transactions for the first quarter, and that debit now far exceeds credit card transactions. Issuers of Visa, which owns a 70% share of the U.S. debit market, have the most at stake. Visa and MasterCard set interchange fees and pass the money to credit union and bank card issuers.

Visa’s continued strong earnings are a major benefit to credit unions, which share in the billions of dollars of interchange fees charged on Visa-brand debit and credit cards, and also own Visa stock, one of just two stocks broadly held by credit unions (MasterCard is the other).

Visa results show that interchange on debit transactions, estimated at some $20 billion last year, continues to be the fastest-growing segment of the payments market. Credit unions are estimated to earn a tenth of that, or some $2 billion.

The Fed is in the process of implementing provisions of the Dodd-Frank Financial Reform Act that are expected to set new limits on debit interchange that could reduce those fees by as much as 70%, which would be a major hit to credit unions and banks.

Visa said its debit transactions in the U.S. rose by 15.7% in the first quarter to $365 billion, while credit transactions rose just 5.3% to $226 billion.

 

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