Deutsche Bank Just Met With Visa's CEO, Says Business Is 'Healthy'

In a report published Tuesday, Deutsche Bank analyst Bryan Keane discussed a recent meeting with Visa Inc V's CEO Charlie Scharf along with other key executives at the company's San Francisco office.

Shares of Visa remain Buy rated with an unchanged $79 price target.

New Products

Keane noted that Visa's management is particularly focused on the digital opportunity (specifically tokenization and Visa Checkout) and actively working with issuers and merchants in rolling out new products. The analyst added that the company will continue to use pricing from time to time but appears to be backing off the strategy of charging token fees.

"Visa continues to view tokenization as a means to reinforce Visa's position in the payments value-chain and increase its share of processing transactions," Keane wrote. "Besides shelving charging token fees, Visa also doesn't appear eager to roll out new card present rates for ecommerce and in-app mobile transactions."

Visa plans to roll out tokenization internationally in April while e-commerce tokenization has been delayed a few months.

Keane also discussed Apple Inc. AAPL and stated that Visa doesn't believe Apple will get any economics for interchange outside of the U.S.

Market Leader

Visa also reiterated it is in a leading position in the very competitive co-brand space and that its recent Costco Wholesale Corporation COST win goes "far beyond the economics it receives" considering the uniqueness of the exclusivity of the deal. The company is also confident it will capture the non-Costco spend on AMEX issued cards which could provide further volume upside.

international Business

Shifting to Visa's international business, Keane argued that the company is not likely to generate a material revenue opportunity near term in China given the economics would likely still be controlled by China-based issuers.

In Europe, Visa expects European banks to eventually exercise the put option, but the time frame remains difficult to determine. In the long-run, Visa believes the demand for innovation will overcome the desire for European banks to maintain control.