Visa USA Posts 11.6 per cent growth in 2003

Usage on Visa payment cards issued by U.S. financial institutions surpassed $1.1 trillion in volume for a single calendar year, the greatest volume reached during a 12-month period in the history of electronic payments.

"Visa's success in 2003 proves that consumers are demanding more from their payment options -- more security, convenience, flexibility and rewards, even for everyday purchases -- and they are turning away from cash and checks," said Carl F. Pascarella, president and chief executive officer, Visa USA. "As consumers migrate to electronic payments, cardholders turn most often to Visa as their brand of choice. That's why approximately $13 out of every $100 spent by U.S. consumers in 2003 was on a Visa-branded payment card."

During the past year, the number of Visa-branded credit, debit, prepaid, and commercial cards issued by Visa Member financial institutions in the U.S. rose to 429 million. These cards generated 16.1 billion transactions in the U.S., up 11.7 percent over 2002.

Credit cards remained the primary source of Visa's volume in 2003, growing 6.6 percent to $650 billion. Over the last decade, however, as Visa continues to move strongly beyond its credit roots to become a payments company, debit cards, which allow consumers to pay for purchases with ready funds, have become an increasingly significant driver of volume growth. These complementary products provide consumers and businesses with a broad range of payment choices.

In 2003, debit represented 41 percent of Visa volume, and 59 percent of total Visa transactions. Visa check card volume grew 19.5 percent to $454 billion. By comparison, in 1993 Visa check cards represented just 6 percent of total Visa volume and only 8 percent of total transactions.

Visa also posted significant gains in prepaid cards, the result of broad consumer demand for gift cards during the 2003 holiday season, and made substantial inroads into new merchant sectors that have traditionally been dominated by cash and checks. These include quick service restaurants, bill payments and movie theaters.

"It took Visa nearly 30 years to reach the trillion dollar mark in U.S. volume," said Pascarella. "Thanks to continued strength in the demand for our credit products, the rapid growth of debit and prepaid cards and the ever-growing acceptance of Visa as "today's money," we anticipate reaching the two trillion dollar mark just six years from now."

Visa's growth is especially notable considering the sluggish economy in the first half of 2003, and the range of business challenges that confronted the organization during the year. Visa's progress came amidst a historic year during which Visa resolved its merchant litigation; expanded Visa usage in new acceptance markets; accelerated the adoption of prepaid cards; and renewed or initiated partnership agreements with more than 450 leading financial institutions.

"We owe our progress to the strong partnerships we share with our Member banks and our renewed focus on merchant relations," said Pascarella. "There's a commonality of objectives among our key stakeholders. Banks want to strengthen their relationships with cardholders and merchants. In turn, merchants want to better serve their customers at the point of sale. And, cardholders want convenient, reliable access to their finances anytime, anywhere. Visa's role is simple and clear; we must provide the payment solutions that banks and merchants need to meet the demands of their customers. Our 2003 performance proves Visa is delivering."

Visa Milestones for 2003

In addition to the continued expansion of Visa's debit program, the past year included other key milestones and advancements for the financial institutions that issue Visa cards, as well as the merchants that accept Visa cards, including:

-- Four consecutive quarters of share growth in Visa credit card purchase volume that enabled Visa to reaffirm its leadership position in the bankcard credit category with a 57.4 percent share of purchases.

-- Ongoing momentum in Visa commercial card growth, where Visa posted a 20.4 percent increase in volume. Of particular note is Visa's growing presence in the Small Business category, where Visa usage topped $56.6 billion, a 28.6 percent increase over 2002.

-- More mainstream awareness and greater popularity of Visa prepaid cards including Visa gift cards and payroll cards. Visa prepaid card sales and cash volumes grew last year by more than 240 percent, primarily due to more than 300 major employers and several payroll providers now offering the Visa Payroll card as a paycheck alternative. Visa annual volume placed on Visa prepaid cards now exceeds $1 billion, on track with Visa's business plans to reach $50 billion in prepaid card volume in the next five years. Visa also is experiencing growth in the government sector as states explore new ways to securely, conveniently and more efficiently deliver disbursements. Currently 5 states are piloting distribution of child support payments through Visa prepaid cards.

-- The continued growth of Interlink, Visa's U.S. PIN-based point-of sale network, which enables consumers to use their ATM cards at more than 1.2 million merchant locations in all 50 states. Interlink's volume in the U.S. increased by 35 percent to $35.2 billion, while transactions increased by 32 percent to one billion.

-- The introduction of new types of products designed to address growing cardholder demand and allow Members to better compete within their markets. These include the Starbucks Duetto Visa card by BankOne, the first hybrid Visa card that functions both as a credit card and a prepaid card, as well as the Bank of America Mini Visa card that attaches to a key ring for greater customer convenience.

-- Providing greater flexibility for Visa issuers to customize cardholder enhancements and benefits. This includes extending auto rental insurance coverage to all Visa credit cardholders.

-- The development of the Visa Extras rewards platform making it easy and cost effective for Visa issuers to extend rewards earning opportunities to more and more cardholders, including consumer debit cardholders.

-- Steady growth in the e-commerce category as online purchases made with a Visa debit or credit card increased by 53.2 percent over 2002 in dollar volume, totaling more than $60.4 billion. The number of transactions grew 44.5 percent to more than 722 million transactions.

-- New services to help merchants facilitate seamless acceptance of cards, increase efficiencies and enhance customer service. These services include:

-- Visa Account Updater, which automates the process of updating customers' Visa card information.

-- Visa's POS Balance Inquiry Service that enables merchants to provide consumers with the balance on Visa gift cards.

-- Merchant Direct Exchange, which provides merchants with faster authorization through a single processing pipeline.


New and Emerging Merchant Sectors

Visa's ongoing effort to expand the acceptance of payments cards in new merchant sectors also continues to be a significant factor in chipping away at cash and checks' dominant share of consumer spending. With a growing population becoming more reliant on and more demanding of their payment cards, electronic payments are becoming embedded everywhere people live, work and play -- from toll-booths and vending machines to dentist offices and taxis.

In 2003, volume in new and emerging merchant sectors increased 25 percent to more than $120 billion, with much room remaining for further growth. Some of the market sectors that posted the strongest gains include:

-- Quick Service Restaurants ($138 billion industry): In an industry where the overwhelming majority of payments are small cash transactions, Visa purchases in 2003 grew 105 percent to $6.5 billion.

-- Consumer Bill Payments ($779 billion industry): Household bills such as home phone, cellular, cable television, insurance and even rent, that have predominantly been paid by checks are increasingly being settled with a Visa debit or credit card. In 2003, Visa's bill payment volume grew 26 percent to $50.6 billion.

-- Movie Theaters ($9.5 billion industry): More moviegoers are purchasing tickets in advance on the Internet, and more movie theaters are accepting Visa at the point-of-sale. As a result, Visa's nationwide sales volume represented 12.6 percent of the movie industry in 2003, reaching $1.2 billion in volume (up 37.5 percent from 2002).


The Year Ahead

"Our successes of the past year have propelled Visa into 2004 with a great deal of momentum. 2004 will be a dynamic year for our industry, as consolidation creates new challenges but also new opportunities for those companies best prepared to embrace them. Fortunately, Visa has a 30-year track record of delivering value and meeting the needs of our Member banks, merchants, and cardholders. That is why I am confident that we will maintain our momentum as the payments leader in 2004 and beyond," concluded Pascarella.