Visa Inc. stock is one of the worst performers in the S&P 500 on Tuesday. It’s almost at its worst percentage drop in almost three years.
A late Monday night story from Bloomberg News said that the Justice Department was getting ready to file an antitrust case against the payment technology giant. This made investors nervous. Bloomberg said the lawsuit could come as early as Tuesday. It would be about Visa’s V -4.18% debit card business and say that the company did things that made it hard for others to compete in the market, according to the story.
Visa wouldn’t say anything about the Bloomberg story. When BourseWatch asked the Department of Justice for feedback, they didn’t answer right away.
Visa stock is down 4.39% in the afternoon trade on Tuesday. It’s on track to have its worst one-day drop since November 17, 2021, when it fell 4.70%.
The Justice Department hasn’t actually said that they are going to bring a case against Visa yet, and it’s still not clear what will happen if the government is successful.
This story from Bloomberg “is not surprising, but it’s also not good,” said Dan Dolev, an analyst at Mizuho.
The payments situation is different now than it was even five years ago, which is likely something that investors were worried about on Tuesday. Back then, there weren’t many good ways to pay besides card networks. But now there are more ways to do business. For example, the Federal Reserve offers FedNow, a real-time payment service that lets businesses and people move money between accounts.
“The main difference now is that you can use methods other than debit,” Dolev said. More than 900 banks have signed up with FedNow, and other businesses are also working on their own ways to get around the card networks. In this case, Walmart Inc. WMT 0.28% is planning an instant choice that will let people use their bank accounts to pay.
Last week, Harshita Rawat, a Bernstein analyst, wrote that “pay-by-bank on Walmart itself is not a big deal.” However, she said that “the growing prevalence of pay-by-bank solutions is a key disruptive risk” for Visa and Mastercard Inc. MA -2.10% The pay-by-bank method is being worked on by Walmart and Fiserv Inc. FI -1.79%.
But Andrew Schmidt of Citi thought that the increased competition could be good for Visa. In a note to clients on Tuesday, he said, “The company probably has a good case for making the debit market more competitive given Mastercard debit portfolio wins (e.g., Citizens), Reg II clarifications that support [e-commerce] routing over alternative networks (e.g., STAR from Fiserv), and more account-to-account payments being available.”
“However, there is likely to be a small regulatory overhang for [Visa], and things may take longer than expected with different results,” Schmidt said.
Visa has been in trouble with the law before, and Bloomberg connects the possible Justice Department case to the agency’s previous review of Visa’s attempt to buy Plaid, a company that makes technology that connects people’s bank accounts to fintech platforms. The Justice Department was against the planned merger, and in the end, Visa and Plaid called off the deal.
Visa said it was sure it would have won a lawsuit but didn’t want to start a long legal fight when it shelved its plans to merge with Plaid in 2021.
But it’s not clear what would have happened if the two had gone to court. Dolev said on Tuesday that the 2020 charge from the Justice Department was “very damning.”
