Five Reasons to Embrace Visa IPO

Updated from 1:22 a.m. EDT

And now, the IPO that we've all been waiting for.

Visa, the global electronic payments company, is set to price later Tuesday in what is likely to be the largest IPO in U.S. history -- and possibly the biggest one we are likely to see for some time.

Visa's member banks stand to gain a windfall, while investment banks may be hoping a successful Visa IPO heralds a return to a robust market for equity offerings, but it's probably the last hurrah of a cycle coming to its close.

Even so, the offering is a welcome distraction from that other big story in the financial markets, which shall not be mentioned here.

Fee Fight May Trim Visa's IPO Gains

There had been some talk that the Visa IPO would be delayed, citing that ever-handy bugaboo "market conditions." But that's an excuse for wimps, and Visa's IPO is anything but a wimp. Visa has plenty of things in its favor. Here are five of them that could help provide the company a warm welcome on Wall Street:

1. Visa is not just the biggest U.S. IPO ever, it is one of the biggest, most recognizable brands to list on the public markets in some time. Google in 2004 wasn't as big, but maybe Kraft was in 2001 when it raised $8.7 million. Brand goes a long way in priming interests among individual investors.

Some 16,000 financial institutions have issued 1.5 billion Visa cards around the world, and they are accepted by 129 million merchants. Visa doesn't issue any of those credit cards itself, nor does it take on any consumer credit risk. But it does act as a valued front-end brand as well as a back-end payment processor.

Visa's brand has had little trouble in gaining acceptance around the world. In fact, much of its future revenue growth will come from Asia Pacific, Latin America and the Middle East, where consumer classes are expected to grow over the next decade.

2. Visa isn't exactly recession proof, but it does have an impressive record of maintaining growth throughout the past two economic downturns. According to Visa CFO Byron Pollitt, monthly payment volume has grown between 9% and 13% every year for each of the past 20 years, including the recessions earlier this decade and in the early 90s.

And thanks to Visa's growing business in the debit card markets, more of its revenue is coming from so-called nondiscretionary spending, which includes money for things such as gasoline, utilities and pharmaceuticals. In the early part of this decade, nondiscretionary spending accounted for 27% of these transactions, a ratio that rose to 42% last year.

3. Ten years ago, debit transactions were only a small portion of Visa's business. But they have been growing by more than 29% a year over the past decade, from 1.3 billion transactions in 1997 to 17.2 billion transactions last year. Visa is by far the leader in debit transaction processing, with more than 60% of market share.