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Visa is a world leader in the credit card industry – and they are looking to get even bigger.  The company announced on April 21 that it will pay $2 billion cash, or $26 a share, for Cybersource, which will become a wholly-owned subsidiary.  The purchase, subject to customary closing conditions and stockholder and regulatory approvals, is expected to close sometime in Visa’s fourth fiscal quarter of 2010 (ending September 30).

Cybersource, which provides payment processing, fraud management and payment security solutions to approximately 295,000 merchants, processes about 25% of ecommerce transactions in the U.S. Its merchants include British Airways, H&R Block, Nike, Facebook, Google and Home Depot.  Cybersource processed $120B through Visa in 2009 and 90% of its revenue is in recurring business.  Is Visa crossing the line into merchant processing, where they would reap revenues from transaction processing services as well as from the assessments it charges to merchants?  Not according to Visa.

“PayPal has 78 million accounts in 190 markets around the world.”

During a conference call held on April 21, Visa discussed how their strategic focus will be on “growth in the ecommerce sector by increasing the usage of Visa core products, using Visa’s client relations to drive global expansion, building on CyberSource’s merchant relationships to grow Visa ecommerce solutions and delivering best-in-class fraud management and data hosting solutions”.  According to Visa Chairman and Chief Executive Joseph Saunders, Cybersource wants to expand into the international market, primarily Latin America and Asia, through Visa’s global presence.  Last year, only about 8% of Cybersource’s revenue came from outside the U.S.

Visa is trying to find ways to compete with other ecommerce companies, such as PayPal, who has 78 million accounts in 190 markets around the world.  Although Visa has a strong global presence, the company wants to expand into global ecommerce markets where mobile payments are becoming more mainstream, primarily due to the lack of infrastructure for processing card payments.  Cybersource will help them get there with its strong foothold in mobile payment systems.

Ecommerce is a hot area for many companies trying to expand globally.  MasterCard’s next CEO, Ajay Banga, identified emerging markets and ecommerce as priorities for the company and it has created a new global research and development unit for that purpose.  MasterCard also recently revealed that it is opening up an online mall (“MasterCard Set to Open an Online Shopping Mall“) and Walmart is increasing its global ecommerce efforts (“Wal-Mart Ramps Up Online Efforts Globally“).

Visa is also planning to roll out their new Right Click by Visa product – which will enable consumers to comparison shop online, solicit feedback from friends, and checkout faster – sometime this summer.  Moving towards the year 2015, Visa’s strategic goals include “global diversification, entering new businesses, growing VisaNet transactions, and becoming a global top 75 company through market growth”.  Currently, 59% of Visa’s revenue comes from U.S. consumers.

For those concerned about Visa crossing the line into the acquiring world, sit tight.  On the April 21 call, they cleared the air by stating that Cybersource will move out of the processing business, referring merchants to financial institutions that partner with Visa.

A copy of the presentation used on the April 21 conference call can be found here.