Why Visa Shares Got Hit With an Overdraft
Jul 31st 2013 3:17PM
Updated Jul 31st 2013 3:20PM
What: Shares of Visa have suffered one of the worst declines of their brief public history today. After bottoming out at a 10% loss, the stock has recovered somewhat and clings to a 6% loss as of this writing -- the result of a court ruling against the capping of "swipe fees."
So what: Two years ago, the Federal Reserve sought to cap fees per debit-card transaction at $0.12 apiece but was pressured into raising that limit to $0.21. After a contentious battle between financial-industry lobbyists and a retail coalition, U.S. District Court Judge Richard Leon overruled the central bank's authority, which appears to have put the ball back in retailers' courts. Leon's ruling says that the Fed disregarded Dodd-Frank regulations by "inappropriately inflating all debit card transactions by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction."
As a result of the ruling, MasterCard also fell at lunchtime, but that stock has since regained virtually all of its ground. American Express , however, is down by about 2% after dropping at the same time. It has yet to recover to its pre-ruling level, despite the fact that it really does not deal with debit cards at all. Go figure.
Now what: Visa was hit harder because it controls so much more of the debit-card market than its peers -- in 2012, nearly 30% of all card purchase volume was transacted through Visa debit cards, compared to just under 16% for American Express credit cards and 12% for MasterCard debit cards. But let's look at this from a really simple perspective: When was the last time the financial industry lost anything significant in the American legal or political arenas? If you think Visa might actually be significantly harmed by this ruling in the end, go ahead and reevaluate your stance toward its stock. Otherwise, you might as well hang tight, or take this drop as an opportunity.
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The article Why Visa Shares Got Hit With an Overdraft originally appeared on Fool.com.Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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