Regarding the Mastercard and Visa duopoly, I would highlight the risk of EU countermeasures in a trade war:
Both practically print money in the EU area, as every transaction through them provides a lucrative slice.
If tariffs start to be imposed on EU exports, then I consider it a likely countermeasure to lower the fees of this duopoly through EU-enacted legislation. Limits are already set even now, so lowering them easily comes up for discussion in a trade war situation.
Would the upper limit of fees be raised back to its former level if the trade war ends? Not necessarily.
On the flip side:
In the long run, it will be even more difficult for competitors to challenge Visa and Mastercard, as due to lower fees, there is even less incentive than currently to try to get consumers to use other payment methods. For merchants, cash would become relatively even more expensive, and curbing its use would again be a degree more attractive. This would accelerate the long-term shift away from cash. So, I don’t believe the duopoly would weaken because of this, but at least in the short term, profitability would take a significant hit.
It goes without saying that other states can also impose similar restrictions on the fees charged. Trump is doing his best to give others reason to do so. Trump naturally wouldn’t like this, but Visa and Mastercard would likely end up among the countermeasures in a prolonged trade war.
Fining and regulating US companies almost became one of the EU’s main activities. The previous US administration further lowered the threshold by setting an example itself, fining and regulating its own. Now, new winds are blowing, and the Trump administration does not look favorably upon the continuation of such practices without countermeasures, so the enthusiasm for fining will cool down when they impose similar arbitrary billion-dollar fines on EU companies. At the inauguration, the leadership of the most heavily fined tech companies sat in the front row.
In the Mastercard thread, there might be interest in how American Express performed.
American Express exceeded expectations in terms of both revenue and profit. The company continues to serve an affluent customer base and benefits from its strong global brand, but on the other hand, challenges include intensifying competition from fintech and BNPL services as well as increasing regulatory pressure.
Mastercard indeed started the year strongly, with revenue growing significantly from last year. The briskness of payment traffic was visible in both domestic and international “consumption,” and cross-border payment traffic, in particular, was at a good level. This also strongly supported earnings development.
The company gained further momentum from digital services and cybersecurity solutions, whose demand continued to grow. The number of transactions also continued to increase, indicating a further shift towards card and digital payment services.
Shareholders were, as usual, remembered with share repurchases and dividends. Mastercard’s outlook remains stable, and the company will, of course, continue its profitable growth.
If one reads and deduces from the tweet below, then from Mastercard’s and Visa’s perspective, stablecoins do not yet significantly threaten the card-based payment ecosystem, but on the other hand, why not “a little” later?
Stablecoins can attract merchants with lower costs, so apparently, the growth in consumer use has been limited. Both companies benefit from a strong network model and compatible standards, unlike the closed solutions of individual operators.
The clarification of regulation is being closely monitored, but risks are seen mainly as a short-term concern.
A much-discussed new law approved in the United States could, according to the article below, revolutionize the world of payments, as stablecoins challenge traditional payment giants, namely Visa and Mastercard.
The article discusses what this means for the payment industry in general, for consumers and investors, and why Visa and Mastercard are not yet out of the game.
So, while stablecoins could grow fast, they probably won’t replace Visa and Mastercard overnight. It’s more likely that they will exist alongside each other — for now.
MC exceeded expectations in the second quarter in terms of both revenue and profit. Growth was based particularly on a strong payments business and also on demand for value-added services, which were naturally also supported by acquisitions.
Both the total number of payments and purchase volume continued to grow rapidly.
Visa and Mastercard are close to an agreement with merchants in a decades-long dispute.
The card companies would lower fees by about 0.1 percentage points and ease rules, allowing stores to refuse, for example, high-fee bonus or loyalty cards. However, the agreement still requires court approval.
The tweet below highlights how Visa and Mastercard are rapidly adopting stablecoins, especially in payments in developing countries where dollars have been in demand.
Visa is expanding rapidly, and Mastercard is planning the acquisition of Zerohash. A new US law encourages companies to pursue such solutions, among others. The greatest use is in prepaid cards, while stablecoin credit cards are still in their infancy. Direct payments between businesses and individuals still dominate.
This tweet contains reasons why some are interested in MC
MC’s dividend has grown rapidly. The dividend takes up only a small part of the company’s earnings and cash flow, so it is easy to pay and there is plenty of room for increases.
At the same time, the company buys back just over 2% of its own shares annually, which provides a nice lever for earnings per share growth.
As a side note, it’s worth mentioning that Visa has roughly the same dividend %, with similar growth, a slightly higher payout ratio, and relatively slightly larger share buybacks.
At a quick glance, it looks like MC is doing really well, and the final quarter of last year went great. Results beat expectations by a wide margin, as people used their cards actively around the globe.
Travel-related spending in particular saw brisk growth; at least many investors are pleased that the company is returning a fair share of its profits to shareholders (buybacks and dividends), and the future outlook also seems to be steadily rising.
