The sale of Visa Europe could lead to multi-million pound windfalls for UK high-street banks, it has emerged.
Currently, Visa Europe is owned by thousands of lenders – but it is now being sold to its once sister company, Visa Inc. The latter was floated on the US stock market in 2008 and the deal means some of the UK's main banks could receive up to £1 billion between them.
Barclays, for example, has said it expects to make £400 million from the sale. Lloyds Banking group and Royal Bank of Scotland – both of which were bailed out by the UK government at the height of the financial crisis – expect to make £300 and £200 million respectively. HSBC's estimated profit from the sale is £150 million.
Commenting on the news however, analyst Chirantan Barua, has warned that the benefits of these windfall payments may not be a long-standing. She says that the deal will only be short term boost in capital.
"Now that the banks will be 'external' to the payment system they will see their fee income margin start to be squeezed and we wouldn't be surprised if Visa tried to increase the margins in Europe at the expense of the banks," he said.
It is believed that there are more than 500 million Visa cards that have been issued across Europe. The timing of the deal is also important, say experts. New regulations will soon cap fees that banks can charge retailers for debit and credit card use. The use of cards is also expected to go up in coming years and the sale will allow Visa to better compete with rival Mastercard.
Charles Scharf, chief executive of Visa Inc, said he was excited about "unifying Visa into a single global company with unmatched scale, technology and services". He believes the transaction will be beneficial for everyone involved – from the financial institutions and merchants, to cardholders and other partners, as well as employees and shareholders.
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