The Market For Money

I just read this on Scott Loftesness's blog and thought it was worth sharing. Scott was an EVP at Visa in the early 90's and his blog is an unbelievably comprehensive discussion of the payments space. Here is his discussion of Visa's recent announcement that the Visa system had reached $1 trillion in annual United States transaction volume. It is an amazing growth curve and reminds me of a comment Peter Thiel, the former CEO of PayPal, made to me one day when we were having lunch: when he was pitching PayPal to VCs he was tempted to describe his market opportunity as the "market for money." Visa's numbers prove that that is precisely their market. VCs are always looking for big markets to penetrate and the market for money certainly qualifies. Here are Scott's thoughts:

Visa USA announced this morning that, for the first time, its annual sales volume exceeded $1 trillion.

The record usage means that an average of $32,000 went through the Visa system every second of every day over the 12-month period that ended March 31 - or nearly 10 percent of the 2002 U.S. Gross Domestic Product.

"One trillion dollars is an almost incomprehensible number, but it represents clear evidence of the silent revolution we're witnessing in the way consumers pay for goods and services. It means $12 of every $100 consumers spent in the U.S. is spent using a Visa card," said Carl Pascarella, president and CEO of Visa USA. "This is an important milestone in the history of U.S. commerce. Clearly, more and more people rely upon the security and convenience of Visa credit, debit and other payment products. To put it into context, $1 trillion could buy 162,000 Harley-Davidson motorcycles every day for a year."

By comparison, $1 trillion is greater than the combined volume of all other U.S. payment organizations, a field that includes MasterCard, American Express, Discover and others.

Just before I left Visa in 1994, I remember having a discussion with a colleague about growth in sales volume. 1993 had just ended with $500 billion in annual Visa sales on an international basis. We were focused on that total growing to $1 trillion globally over the next five years. As I recall, the US in 1993 was about 40+% of the global total -- so the growth in US volume over the last nine years has been pretty amazing. Of course, this is also one of those statistics that has a nice built-in inflation hedge too (the numbers just keep growing!). $32,000 a second -- at a $50 average ticket that works out to an average of 640 Visa transactions per second.

Comments

[Todd Bass]

By my reckoning, Visa's figures don't add up. America's annual GDP is just over $10 trillion. If Visa's annual transaction volume is $1 trillion and that represents 12% of consumer spending, then total consumer spending would have to be close to the size of the entire economy. But, IIRC, consumer spending (consumption) only accounts for something like two-thirds of the economy.