Visa moves forward with plans to go public

Following the public-offering lead of its multidecade rival, MasterCard Worldwide, San Francisco-based Visa USA has announced plans to restructure. The expected outcome includes a new company name and a new image among retailers andindependent sales organizations.

"This is a great time in Visa's history to make this transition," said William I. Campbell, chairman of Visa International's board, in an October news release. "We continue to be a leader in the payments industry. Our growth and emerging market strategies are succeeding, and the growth potential in the global payments industry is tremendous."

The company's "restructuring" is slated to occur in two phases. (Read also,Visa posts fees on the Web.)

The first phase is expected to group Visa USA Inc., Visa Canada and Visa International, which includes Latin America, the Caribbean, Asia-Pacific and Central and Eastern Europe. The new entity would be known as Visa Inc.

Visa Europe is not expected to be part of the IPO. It will remain a bank-owned association but is slated to be become a licensee of Visa Inc.

The second phase is the public offering, which is expected to occur within the next 12 to 18 months.

Visa executives say the restructuring will eliminate growth setbacks, caused, they claim, by legal wrangles with merchants. The company has also said it expects to elevate its position with retailers and ISOs by opening its ownership up to a larger pool of investors.(Read also, ,Merchants seek congressional action on interchange fees,Fed won't set interchange feesandInterchange wars: Merchants tug networks for change.)

But John Willmon, vice president of business development for Dallas-basedColumbus Data Services, said Visa's offering could go either way.

"It could be good in that they will be more concerned with public perception and revenue," he said. "It could also mean that they would be more concerned if the ISOs were to bring a class action suit against them for discrimination with their interchange payouts."

Or, it could go the other way, if the public Visa becomes too large and powerful.

"It also could be very bad in that they will become the big bad wolf," Willmon said.

An industry impacted

If Visa becomes the industry "heavy," financial institutions might be encouraged to become Visa-exclusive - meaning they only use the Plus network and issue Visa cards - Willmon said.

Processors would be forced to use Plus, which could cause ISOs to lose revenue, he added.

But Warren Cato, chief executive of Marietta, Ga.-based ISO Cabe and Cato, said Visa's IPO should make Visa's practices more transparent, and that's a good thing.

"They would have to play by different rules," Cato said.

If Visa follows the path MasterCard took after its IPO, ISOs will benefit, he said.

Cato praised MasterCard for its willingness to work with ISOs after itspublic offeringin May.

"MasterCard is looking to the ISO market as an untapped source," he said. "We don't get that feeling (from Visa). I think the ISOs would like it if Visa wanted to promote (itself)."

Kevin Carroll, who MasterCard brought in two years ago to focus on debit-card management, said MasterCard is continually building its value chain.

Like MasterCard, Visa expects the IPO to have positive effects.

"Visa expects the proposed restructuring will best position the company to meet the evolving needs of our customers, including merchants, and will accelerate our growth by  improving organizational efficiency,  addressing certain legal claims that exist in some markets; and, increasing access to capital," wrote Paul Cohen, Visa's vice president of corporate relations, in an e-mail.