Shares of payments-giant Visa (V 0.55%) jumped 12% in December, according to data provided by S&P Global Market Intelligence. The company is benefiting from increased consumer spending as people get back to buying after a robust holiday season and a loosening of restrictions from the pandemic.
Visa is the largest credit card-processing company in the world, with $24 billion in revenue for fiscal 2021 (period ended Sept. 30). It takes a fee every time you swipe, giving it ample room to pull in sales consistently. When the economy is good, Visa's good. And since the economy is good much more of the time than not, Visa usually does nicely.
Retail spending has been increasing for the past few months, rising 0.06% in the most recent report for November. Visa gets a tiny cut of that, which adds up to billions of dollars.
In line with that, credit card applications hit a high in October, with 27% of Americans saying they had applied for a credit card within the past 12 months, according to the Federal Reserve bank of New York. More consumers are applying for credit cards, giving Visa more opportunities to make money.
At the beginning of the month, a company filing disclosed that it was seeing improvement in cross-border trade fueled by relaxed travel restrictions. Cross-border volume improved 11% from October to November, excluding intra-Europe transactions, and was 106% of the 2019 number. That led to the stock's biggest single-day increase in over a year.
As financial technology (fintech) has taken up more space at the table, Visa has joined the club and dubbed itself a "global technology payments company." Much of fintech is still focused on a traditional payments network, just using a digital framework. That puts Visa very much in the picture, and it's also moving toward digital processes.
Not only does Visa provide the gateway for countless other companies to layer their services on top of its own, it has relationships with many other companies to jointly contribute new technology for cutting-edge payment infrastructure. It's well-positioned to keep growing in the future.
Visa's a high-margin business with reliable profits and should continue to reward investors in 2022 and beyond.