While many consumers think of debit or credit cards when considering Visa (NYSE: V), it bills itself as a "global payments technology company." In keeping with this description, Visa has recently invested an undisclosed sum in an online payments company called Stripe. Neither Visa nor Stripe's executives would disclose the amount of the investment, but its ownership stake is said to have valued the online payments upstart at approximately $5 billion.
Online payments in general, and mobile payments in particular, are forecasted to grow at a staggering pace over the next several years. Visa, coming off another strong quarter in which it handily beat analyst estimates thanks to its 12% jump in operating revenue and reaffirming its fiscal 2015 guidance, has also inked a partnership agreement with the startup.
As evidenced by the recent spin-off of PayPal, the digital payment industry offers a world of opportunity. Though Visa could almost certainly develop and market its own digital payment solution, the alignment gives it immediate access to Stripe's bevy of app developers. Stripe is also recognized as a quick and easy solution to implement, making Visa's entrance into digital payments that much quicker.
After reporting $3.5 billion in revenues last quarter, and expectations for future quarterly earnings successes, Visa's investment in Stripe is not likely to dramatically impact sales in the near-term. However, as fast as the digital payments market is growing, Visa may find that aligning itself with a quiet industry leader could prove to be a sound, long-term investment.
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Tim Brugger has no position in any stocks mentioned.