Mizuho: Visa Mobile Payments May be Hit by Rule Change
Recently, word emerged about changes to the Dynamic Currency Conversion (DCC) rules that might well have had an impact on the way people used ATMs. Visa is actually on track to be very deeply affected by this change, and Mizuho recently released a report detailing what it believes will be the impact of the DCC rule change.
First, a bit of background. DCC won’t actually take effect until next April. Visa, however, is working to position itself to take advantage of this new development, bringing out a new solution for ATM operators. With the new Visa solution, customers will be able to engage in several different banking services from the ATM interface, including account-to-account transfers, PIN changes, and even mini-statements.
With DCC in place, cardholders can either make transactions in their home currency or in the local equivalent. This is especially useful for travelers, the kind of thing that’s a shot in the arm for Visa.
Mizuho, meanwhile, agrees, and pretty strenuously. Its report points to two major impacts: it improves pricing for dynamically converted transactions, which gives Visa a little extra profit per transaction. Though there will be an incremental cost with this–changing cards and ATMs to reflect the rules and such–an increased cash volume will only help things.
Mizuho also notes this will only be a partial benefit, as the changes don’t take hold until mid-April. That leaves an entire quarter of the year and then some out of the picture. It’s only worse considering that Visa has a September fiscal year. What’s more, customers have to actually opt-in to use DCC, and Mizuho estimates that only about one in four will do so.
with the price target remaining unchanged at $162, it’s a safe bet that the rule lands too late in Visa’s fiscal year to have much impact…this fiscal year. A rule like this, though, could mean some very big changes to come. It improves Visa’s versatility in the market, and gives customers reason to either stick with or move to Visa, and that’s exactly the kind of thing that Visa wants.
This rule change will likely pay off big for Visa, and though it may come a bit too late to be much good this year, next year is still coming.