Key Points
Visa is a high-quality business whose shares rarely go on sale, but that might not discourage investors from owning the stock.
The company’s competitive position is supported by the presence of a powerful network effect.
Stablecoins have an uphill battle to put a dent in Visa’s business model.
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Visa (NYSE: V) is a dominant force in the financial services industry. It runs a leading payments platform that connects consumers, banks, and merchants across the globe. The business even finds itself in Warren Buffett-led Berkshire Hathaway‘s portfolio.
This financial stock trades close to all-time highs, and a valid argument can be made that the current valuation isn’t cheap. But this is an outstanding company that still deserves a closer look.
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Here’s one reason investors should buy Visa.
Image source: Visa.
Visa’s unassailable competitive position
In fiscal 2024, Visa processed 233.8 billion transactions valued at a whopping $15.7 trillion. It currently has 4.8 billion active cards that are accepted at 150 million merchants around the world. That scale is unmatched, and it demonstrates just how formidable Visa’s competitive position is, which is a key reason to scoop up shares.
The business benefits from an extremely powerful network effect. As the number of merchants that accept Visa grows, it’s more valuable to have a Visa card. The opposite is also true, with more cardholders creating more sales opportunities for merchants.
The threat of stablecoins
With the passing of the Genius Act, investors might start to worry about the threat that stablecoins pose to Visa’s business model. As things stand today, there’s no reason to be concerned. While merchants will test the waters in an effort to cut payment processing costs, the real question of whether or not consumers will make the jump.
Favorable legislation passing doesn’t necessarily mean there will be mass adoption of stablecoins. People love their credit cards and the perks and rewards they offer. And a company like Visa is so ingrained in our economy, with the network effect already mentioned, as well as its deep relationships with banks and other players in the financial services industry, that it’s a monumental task to disrupt it.
Visa should continue to dominate the payments landscape for the foreseeable future.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Visa. The Motley Fool has a disclosure policy.
