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Visa (V) Strikes Deal With Klarna, Broadens Reach in Europe

Global payments technology company, Visa Inc. V has partnered with Swedish e-commerce company Klarna that provides payment services for online storefronts. Per the deal, Visa will make an equity investment in Klarna and develop a strategic partnership.  
Klarna seems an attractive investment opportunity for Visa given its fast-growing online payments business in Europe. It currently serves 60 million consumers and 70,000 retailers.
The partnership will enable both companies to better serve their customers for purchases made online and via mobile, across Europe. 
Klarna boosts consistent development of products that suit the changing needs of consumers. It provides them with a hassle-free, flexible payment experience while shopping. 
Visa has been investing in digital payment technologies and establishing relationships with new-generation partners and payment providers to tap the shift in global payments from cash to checks and now the electronic form.
In the past one year, Visa’s shares have added 30% compared with the 25% gain by the Zacks categorized Financial Transaction Services industry. The outperformance reflects the company’s strong business growth and value accretion from acquisitions, partnerships and tie-ups forged recently.
The collaboration with Klarna reflects Visa’s constant endeavors to provide its customers with secure, online commerce in Europe. The company sees huge business opportunity in this region as evident by recent data from Forrester. The data reveals that Europe is expected to see double-digit growth in online sales in the coming years. 
By 2021, growth in the number of connected devices and improvement in mobile connectivity will drive online sales to touch 12% of the region's total retail sales. Additionally, online retail sales are expected to grow at an average rate of 12% per year over the next five years in Western Europe.
The company already has a significant footprint in Europe with the acquisition of Visa Europe in 2016. The union of the unit with Visa made it a dominant player in the payments industry in the region positioning it ahead of other players like Mastercard Inc. MA, American Express Co. AXP. The acquisition has proven lucrative for Visa as evident by the accretion to top line and a significant increase in cross border volume. 
Visa carries a Zacks Rank #2 (Buy). Another stock with the same Zacks Rank is Alliance Data Systems Corp. ADS. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Alliance Data beat estimates in two of the last four quarters, with an average positive surprise of 2.15%.

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