Visa (V) made its long awaited debut and the stock immediately increased by, depending on what media outlet you listen to and what time of day you looked at the numbers, around 35%. The IPO had an interesting feature for a hot deal: a $3 billion reserve fund for legal costs because Visa had been naughty in the marketplace and hurt competitors too much. This is supposed to be the big downside risk. Everyone seems to buy into the concept that for processing fees for plastic, Visa will only go up and we will all live happily ever after.

There is actually a lot to be said for that argument as long as you are able to increase your costs to continue investing in IT infrastructure. So is this a financial stock or an IT stock or an infrastructure stock?

Credit card fraud is becoming the major white collar crime of our time. When a large syndicate taps into the systems and steals substantial amounts of money, who is liable? The bank that issues my cards says it’s not me if I report it quickly. I believe them. So now that Visa is a separate stand alone for profit entity that is providing the IT backbone who becomes ultimately responsible?

Visa will have to set the standards to keep the digital defences sound. If a bank gets cleaned out of say twenty or thirty million but followed all the rules...well I would grab some of my files and walk down to legal for a long chat. We all would.

It seems like a safe boat in a bad storm. But there are risks in everything. The plastic charge card processors are unseasoned and will hit some speed bumps along the way.

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George Gutowski

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