Frank Rong

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    • Wed Jul 30th 18:56 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      I think MasterCard might miss earning tommorrow, as Visa is taking more business from MasterCard.

      Like I said earlier, rebates are going up , way up, by 58% in fact, from 175 Million to 274 million dollars

      Visa faces a potential price war with MasterCard, which could lead to the defection of large clients
      View article »
    • Tue Jul 29th 22:09 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      V Winner,

      here's a link to show how large banks' shares of Visa's Volume
      www.nilsonreport.com/p...

      Visa simply can not afford to lose any of these top ten issuers to either MasterCard or Discover
      View article »
    • Mon Jul 28th 21:02 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      V Winner,

      Other 50 lawsuits are bogus B.S. I don't expect Visa would pay anything for these lawsuits, they all centered on the perception that Visa was over-charging merchants, but these allegation are bull shit. Merchants were willing to take Amex for a fees significantly higher than Visa for years, why then bitching about fees that are lower than you are willing to pay (Amex fees)?
      View article »
    • Mon Jul 28th 20:58 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      V Winner,

      I owned MA and then sold it its legal problems, MasterCard could not get an investment grades from Moodys and Fitch due to its legal issues. Discover in fact can make a very good argument here against V and MA, due to banning acquiring banks from signing merchants for DFS, Its US acceptance was only half of Visa's. That did lots of damage to Discover business. That's not a question. The question is how much, and these damage are tripled under federal aniti-trust laws.

      I think the potential damages to Discover is much higher than Amex got from the settlement
      View article »
    • Mon Jul 28th 20:33 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      V Winner,

      I figure there are probably plenty of business for all four networks. I disagree with you on whom uses Discover cards, In fact, among Discover cardholders, many of them are rich. By the way, how do you become rich? Being very cheap. I use a Discover card since my freshman year in college. Cashbacks, ShopDiscover are few rewards attract lots of cheap people. I don't use Amex to show off. In fact, I know lots of people who are completely broke and use Amex cards. The no.1 Problems Discover had was acceptance. Who are the ones signing up merchants? Aquiring banks or merchant acquirers. V/MA banned Acquiring banks from signing up Discover for Merchants. In many cases, that helped Discover, and that's the reason why we only have four networks.

      Starting a new network is probaly too hard. There are 7.2 retailing locations accepting Visa and MasterCard, another 20 locations outside of US. So to build a global networks are mission impossible. I don't think it can be done. Do you?

      You are asking why Discover has not signed up more card issuers? It's very simple, the card issuers had already owned their own networks - Visa and MasterCard. It's the same reason Discover will not issue Amex Card. Visa and MasterCard allocated their IPO shares based on the cards banks issue. So if banks switch and issue Discover card, they will not get any Ma/V IPO shares. I love to have some shares, wouldn't you? That's why no one switch to Discover, except few issuers.

      But now, both V/MA are independent, and lots of issuers sold their stocks in V/MA, the table will start to turn. Prospect of getting more issuers to issue Discover Cards will get much better.

      Anyway, Like I said, there are plenty of business for everyone, especially globally. Visa can jack up merchant fees one penny here, two cents there to make earning look very good.
      View article »
    • Mon Jul 28th 18:46 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      Discover is big enough to compete. ($220 Billion on both Discover network and Pulse), and small enough to grow very fast.

      V has 2.5 trillion volume, law of large number suggests that it can grow no higher rate than the overall industry.

      Anyway, I think all four networks are going to do extremely well. how much do you think MA and V going to pay to Discover for their past sins (exclusionary rules)?

      View article »
    • Mon Jul 28th 18:38 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      One more thing about Visa, V does not own Visa europe, MA owns a minority share of MasterCard europe. Most of V's business are in US. Outside of US, due to regulations and other factors, they earn much less revenue per transaction than in US. They do however earn lots of money on cross-border fees. Discover bought Diners Club, that's very significant, it now can become a gloabl network.
      For Visa to grow its network volumes that's very difficult, since this bitch is already too big. But for Discover to grow its third-party volume, that's easy, it grew 30% in 2nd Q.
      Talk is cheap of course, we will see if V and MA can maintain their pricing.
      View article »
    • Mon Jul 28th 18:30 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      BAd analogy, every four card brands are very profitable. Every phone companies are in terrible businesses.
      Card networks are hard to duplicate, since you have to have critical masses on both merchants and users. As for which card brands will doing best, that's an easy all: Discover by far, it's only selling for 6 billion, Vs. 55 Billion for V, 30 B for MA,and 41 B for Axp. V and MA used to have this rules banning banks from doing business with Discover, therefore, Discover's acceptance is only half of Visa's in the US. But by early next year, Discover should reach parity with Visa in US. To get banks to issue Discover branded cards is quite easy, shower banks with up front payments. So I think Discover will get lots of business. That's not much different from signing up new cardusers. Banks renew their contracts with Visa and Mastercard every few years. Next time a bank is up for renewal, it will seek the most money from Visa, MasterCard and Discover.

      When asked why people pick one card brand vs another one, 55% of people said acceptance. Once accpetance parity is reached, Discover should get much more business at Visa and MasterCard's expense of course.

      Return on equity for Visa and MasterCard are approaching 100%, that's increditbly profitable, and Amex and Discover have 30%+ return on required equity. Phone companies, they are terrible. They don't really make much money, it's all accounting shanagan
      View article »
    • Mon Jul 28th 17:04 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      I am a contrarian, everyone is bullish on V and MA, and uniformly bearish on DFS and AXP.

      I bet the other way, I bet against grain.

      Can you tell me anyone is bearish on MA and V?
      View article »
    • Mon Jul 28th 16:58 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      VWinner,
      My rebate info is correct, just look into V and MA's 10-Qs and 10-Ks. each transaction, V and MA get a fee, 10 cents + .1% of face value of the transaction. V and MA are doing great right, in fact they will blow out the earning in next few days, but these two companies will see their fees taken away by card issuers.

      Discover and MasterCard pay almost same amount of money to IRS last year for its income tax. MasterCard amortizes incentives to card issuers over the life of the contract, Discover on the other hand deducts the incentives in the month payment occurred as contra-revenue account. Discover under-report its earning

      The key is not looking back what happened in the past, but what is going to happen in the future. I expect transaction volume increase double digits, can Visa and Mastercard still keep the same portion of pie on each transaction. I think their fees are going to erode away as issuers want to get larger portion of Visa and MA's revenue.

      MasterCard is the first one going to take a hit, since most cardissuers have sold stock in MA.

      Vwinner, the question is simple, most cardissuers in US were duo issuers since they owned V and MA. Now many issuers became single issuers, WM is exclusively issuing MasterCard. What make one issuer pick Visa over Mastercard or Discover Card? I think the answer is Rebate. If that's the answer. Do you think rebate incentive will pick up steam, therefore erode V's profitbility?
      View article »
    • Mon Jul 28th 15:16 PM | Rating: 0 0
      Commented on:
      Why Visa Should Thrive
      As an example, let’s say you go out and purchase a watch for $100 by using your Visa card. Out of that $100 purchase, the merchant would usually pay 2%, or $2, of that fee for the use of the card (fees for merchants vary, as larger corporations like Wal-Mart (WMT) pay less than the typical Mom & Pop Shop). Out of that $2 fee, only about $0.20 go to Visa the rest would be paid to the issuer of the card. Here's some more on what happen to that 20 cents,

      Large merchants, like Citi, Chase and B of A accounted for 50% of Visa transaction, Top 10 banks accounted for over 70% of Visa's transaction in the US. the reaction is simple, these large banks want to share that 20 cents. Visa had to rebate back majority of that 20 cents,let's say 15 cents to large card issuers thru rebates and Visa keep about 5 cents. And smaller issuers: sorry, no rebateds.

      The amount of fees V and MA can keep will get smaller, and smaller. as they will compete for both large and small issuers.

      Card issuing business is great business, most people simply have no clue about mirco-economics. Discover and Amex, or COF can simply jack up interest rates customers paying, therefore customers pay for higher charge-offs. It's called risked based pricing, people .

      Can V and MA jack up fees on card issuers? No. V and MA now thet have to compete against Discover networks and Amex for card issuing businesses. The reason V and MA had so large of market share were quite simple, the exclusionary rules they had against Discover and Amex. But that rule is over, gone. Discover and Amex have large consumer base that will not defect over night. V and MA have large customers base can switch to other networks overnight when pricing and incentives are right.

      During the internet bubble, people too much focus on how fast internet is growing, without worrying about competition in the web space. any way, transactions on card networks will grow double digits for sure, but can V and MA keep those banks from jumping to Discover or/and Amex for a lower fees or higher rebates?
      View article »
    • Wed Jul 23rd 17:57 PM | Rating: 0 0
      Commented on:
      Credit Card Breakdown: AmEx Disappoints, as Predicted
      I still think Ian cooper is an idiot. Some consumers are cash strapped, most of American are doing just fine. Amex's problem is really Amex's problem. The numbers of people who defaulted on loans at Amex felt to 5 years low, (Amex Master Trust), but the loan balance per default account doubled from three years ago. One possible reason? It juiced up spending volume by giving people too high of credit limits. I don't like Amex for now.

      MasterCard and Visa are equally toxic. What's stopping a large card issuers from switching its card to Visa from MasterCard, or vice versa? Prices. Visa, MasterCard and Discover will be in a pricing war to get cardissuers to issue their card.

      I like Discover, its earning is still strong. Although charge-offs are picking up recently, that's not a big deal, these losses can be offset by hiking overall rates on customers, or hiking fees on Merchants, and lower funding costs due the lower interest rate cut by the FED

      Visa and MasterCard's loyalty lies with large banks. Top 10 banks control almost 70% of the transaction volumes, losing one large client will see the stock price fall off a cliff. That will happen after banks sell their stocks in MasterCard and Visa.

      Visa and MasterCard are like emperors without clothes, they don't have any direct relationship with consumers. Their futures are in the hands of large banks.

      I wouldn't touch V and MA with a 10 foot pole, these two stocks are the trainwreck waiting to happen, after about 1-2 years from now. People who buy these two stocks don't understand Microeconomics
      View article »
    • Wed Jul 16th 17:18 PM | Rating: 0 0
      Commented on:
      Why American Express Should Be Ignored
      Ian Cooper has no brain, Discover and Amex are far better businesses than Visa and MasterCard. DFS and Amex are getting paid for taking the credit risks. Much more pay than the risks they are taking. Delinquency and Charge-offs are irrelevant, since they can passes along higher loan losses to customers thru high interest rates. MasterCard and Visa on the other hand will have to compete against DFS and AMEX for renting out their networks.
      View article »
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