Visas Anticompetitive Practices - Essay Example

?System Purpose/Objectives Visa Inc has been conducting electronic financial transactions since 1970 and has thus perfected its services all over theworld. As people move towards the paperless economy, the company is well positioned to present people with greater chances of benefiting from its services. Its objectives are mainly aimed at offering the world safer transfer of money from one place to the other throughout the world (Nocera 1995:25). Another objective is to offer clients quick transfers from one area to another within the shortest time possible to allow people to conduct business within prescribed timeframes. This will help them come up with business tat can be accessed and supported from any part of the world provided they have a chance to register for this type of service. The other objective that they seek to achieve is maintaining and increasing merchant confidence in using the visa cards anywhere in the world. This means that they must get into collaboration with other likeminded companies that will help them achieve these objectives given the rise in cyber crimes and identity theft in the world. Another objective is to reduce operational expenses by reducing chargeback and linking authentication to ensure data integrity at all times. They also seek to improve purchase security and enhance integrity through the enhancement of security for an internet purchases (Gitman and McDaniel 2008:58). System Components Before 2007, the structure mainly included of four non-stock companies that had been incorporated as group members into the company’s overall structural component. They included visa international service association, the Visa USA Inc, Visa Canada Association, and visa Europe limited. These were the incorporated members of the group. The others-Visa Latin America (LAC), Visa Asia Pacific and visa central Europe, Middle East and Africa- acted as part of the group’s divisions (Modestus 2012:36). After 2007, the company filed for a restructuring where the four main incorporated companies came together to form a new company that went by the name Visa Inc. When they went for their first IPO in 2007 as a new group, they went on to publicly trade in the US Securities and Exchange Commission (Modestus 2012:37). The Western Europe operations unit became an independent company that was under its member banks. It was also a warded a minority stake in the main company which makes it a component of the whole. There were also other companies that acted as underwriters when the company underwent the restructuring and this means that its components would be increased when these underwriters were considered (Schlossberg 2008:388). Other components that make up the overall company are the items that form the greater part of the company. As such, debit cards, credit cards and prepaid cards also form the bulk of their company. This is because it is the main aspect that keeps them in business. They also deal with automated teller machine networks and point-of-sale terminals for those who deal with debit protocols without the need of getting into any check-writing privileges (Szoka & Marcus 2010:102). Stakeholders The main stakeholders of this company include the western European operation unit, the merged regional offices; the merchants dealing in different sectors and who depend on the service of Visa Inc for their financial transactions, the shipping sector, banking sector, airlines and those who have bought shares in the company (Modestus 2012:49). Risks Despite the fact that people love this new method of transaction, there are risks that are involved in the long run. When people are conducting these transactions, they are not required to be there in person and this means that the probability of getting involved in illegal transactions is high. People have been allowed to transact from the comfort of their homes through the internet and this means that the only thing the bank relies on for authentication is the phone number or an IP-address. These are aspects that can change suddenly, exposing the clients to fraud and money laundering (Szoka & Marcus 2010:98). Criminal cartels may also take advantage of this and fund illegal activities to achieve their goals and tracking this form of transaction may take longer than anticipated. The client’s details may also be stolen and this could lead to scandals with people losing more money despite the assurance that their transactions and their accounts are in safe hands (Weiss 2008:59). Time is mainly instantaneous for these transactions. Tracking it may be difficult taking into consideration the fact that these transactions go through a myriad of steps before the final destination is reached. This means that money transfers may be financing mobs within seconds of dispatching the moment (Gitman and McDaniel 2008:62). Fraud and economic crimes are also at risk of being committed by those who have already perfected the art and this may be worse off given the fact that hackers have devised new methods through which they can track such transactions and divert them to their accounts. The fact that no authorizations like a physical signature rather than an electronic signature makes it more difficult to ensure and enhance integrity and authenticity of the account’s owner (Gitman and McDaniel 2008:68). These are the risks that are attuned to such a company and thus require increased vigilance to ensure that people regain confidence in the system and feel more secure doing such transactions online. Problems that Arose and their Relation to the System Visa has recently been accused of getting involved in anti-competitive practices which has made it difficult for other companies to do well in the industry (Schlossberg 2008:59). They have been accused of getting involved in price fixing which has dismantled the free market (Monks and Minow 2008:159). This has made it difficult for retailers to perform well since the company had a fixed price on how much a client would be charged for paying for their goods using a debit or credit card. The company found itself in deep trouble when they were arraigned in court by more than 7 million merchants who accept debit and credits cards as form of payment for their goods (Rosenbloom 2011:78). They are accused of prohibiting the use other lesser expensive modes of payments such as checks or cash thus compelling the retailers to force the clients to use their services only. By being the dominant player in the industry, they created a monopoly that made it difficult for other companies to match their rates in the market. The charges that were incorporated were too high with the retailers paying close to 75 cents for every $100 spent which means that more money will be charged for bulk users and purchases eating into the retailers profits (Silver-Greenberg 2012). Furthermore, the fact that almost 61% of the financial transactions in the US are from debit cards, it means that they have been raking in millions from transactions all over the country. Worldwide, they command a 38% market share for their credit card services with more than 60% in market for their debit cards services. This can be confirmed by the fact that they handled more than 62 billion transactions in 2009 and this meant that they transacted more than $4 trillion in a single year (Modestus 2012:98). This issue affected the confidence that the people had in the system since they were expected to be honest with all their transactions. Instead they created a monopoly that not only hurt the retailers but also shook the confidence of those who hold such cards. Given the fact that the transactions are done online, the charges of using the debit card could be well more than what they anticipate and this could eat into their cash at the bank (Modestus 2012:89). Lessons Learnt By getting involved in such scandalous behavior, the company has lost more than $7.5 billion in payments with 6.05 being for past damages and interchange fees which amount to $1.2 billion (Silver-Greenberg 2012). They have spent more in settling damages which could have been used in more research and development aspect in deserving areas of the company. Furthermore, people are more worried that they may not be assured of their money’s safety and how much they might lose from online transactions. References Gitman, L.J. & McDaniel, C. 2008. The future of business: the essentials, NY, Cengage Learning. Modestus, J.F. 2012. Visa Inc. Boston, MA, Betascript Publishing, Monks, R. & Minow, N. 2008. Corporate governance. Thousand Oaks, CA: John Wiley & Son. Nocera, J. 1995. A piece of the action: how the middle class joined the money class, New York, Simon and Schuster Rosenbloom, C. 2011. The complete trading course: price patterns, strategies, setups, and execution tactics, NY, John Wiley & Sons. Schlossberg, R.S. 2008. Mergers and acquisitions: understanding the antitrust issues, London, American Bar Association. Silver-Greenberg, J. 2012. MasterCard and Visa Will Pay Billions to Settle Antitrust Suit. Retrieved on 2012-09-27 from, . Szoka, B. & Marcus, A. 2010. The next digital decade, London, TechFreedom. Weiss, J.W. 2008. Business ethics: a stakeholder and issues management approach, NY, Cengage Learning. Read More