Visa Pierces Financial Gloom With $17.9 Billion IPOVisa Pierces Financial Gloom With $17.9 Billion IPO

Shining a bright light on the troubled financial services sector, Visa raised close to $18 billion on Wednesday in what could be one of the biggest initial public offerings in history.

The IPO marks the culmination of Visa's effort to transform itself from a processor of credit card transactions to a provider of financial networks and technology to a broad array of customers and to add a new level of services over upgraded systems.

Visa shares closed at $57, up nearly 30% from their opening price. If the offering sells out, it could become the second-largest IPO of all time, behind Industrial & Commercial Bank of China's 2006 launch, which raised $22 billion, according to Reuters.

Visa has spent five years and billions of dollars annually modernizing and upgrading its transaction system, known as Visa Integrated Payments. The company will process close to 8,000 transactions per second during this year's holidays, and its transaction volume is growing at around 20% a year. In 2006 Visa replaced its West Coast data center with a state-of-the-art facility in the central United States, the precise location of which the company requires visitors not to divulge. The new data center will process more than $1 trillion in transactions this year.

The IPO comes as the credit card business is fragmenting into many different microsegments as more and more devices, including mobile phones, are becoming payment vehicles either over the Web or via "touchless" payment systems in stores. Preparing to go public, Visa has been rolling out new, highly customized incentive and reward programs for retailers as well as an ambitious mobile platform that will allow customers to use their mobile phones like credit or debit cards. Years in the planning, the initiatives are designed to shift Visa's business model from supporting plastic cards to a network-based company that handles many types of transactions over many different devices.

The IPO indicates that the infrastructure companies that carry out payments and trades will fare better in the short run than the ones actually making the transactions, such as credit card suppliers and mortgage lenders. Companies that need instant payments and lightning-fast transactions infrastructure have no choice but to continue investing in the most advanced -- and expensive -- technology.

Paul Sutton, CEO of Kabira, a provider of real-time transactional systems to financial services and telecom companies, says that while he's witnessing the carnage elsewhere, his company is actually thriving. "We are currently not seeing in our direct-sales business any kind of tech spending cutback."

The IPO also comes as credit card processors and banks are under increasing scrutiny and threat of litigation thanks to several massive and well-publicized thefts of consumer credit card information. TJX, the parent company of retailers like T.J. Maxx and Marshalls, took a $20 million computer-intrusion-related charge for its most recent quarter, stemming from an IT security breach in which 45 million credit and debit card numbers were stolen. Thieves later used fake cards based on the data to steal $8 million in merchandise from Wal-Mart stores in Florida.

This week New England supermarket chain Hannaford Bros. disclosed that a system breach resulted in the loss of individual customer data for more than 4 million credit and debit cards.