Ā It’s Mastercard Versus Visa
First, there was cash, then there were checks, and then there were cards. Credit where credit’s due, no payment method has rewarded investors quite like the card, despite so many billions of dollars being thrown at the “next big thing” in that global payments evolution.
The big things right now for stock pickers are high switching costs, brand strength, and network effects. Businesses pay a small fee to Visa and Mastercard every time a customer pays through them. The more customers get the cards, the more companies accept em’! It’s a virtuous cycle that has allowed Visa and Mastercard to take over the world. They even own their own rule-maker, EMVco!
Both companies earn about the same fee per payment, so what’s the difference between them? Well, Visa is bigger, but Mastercard is more international. Visa is less cyclical, but Mastercard is nibbling at its market share. Many investors are sold on the reliable dividend drip, inflation resilience, and prospects for growth as cards continue to replace cash and check use. That’s why most hedge their bets and buy both. However, the doubters are getting louder.
These are tech companies, technically, and credit risk isn’t theirs to bear. Mastercard and Visa actually face a Chinese risk, with the opportunity there being miles away and competitors likely to spread their networks out there first. Some also believe that with lawsuits mounting up and Blockchain around the corner, both stocks are punching well above their weight. Mastercard is up 44% this year, and Visa 28%! Is that deserved, or have the bulls got their timing horribly wrong?
