MasterCard Inc - Stocks

Instrument description

The banking cards have made financial transactions easier for individuals, and today, credit cards, debit cards, and prepaid cards are used by millions of people across the globe. MasterCard is one of the most popular brands when it comes to providing banking cards for business people, investors, and ordinary consumers.

MasterCard Inc. is an American multinational company offering a wide range of financial products and services for consumers, businesses, government entities, and other financial institutions. The company excels in providing electronic modes of payments to users, and some of its famous brands are MasterCard, Cirrus, and Maestro.

The International Global Operations Headquarters of MasterCard is located in Purchase, New York, USA. The main emphasis of MasterCard is to provide payment processes to individuals and card-issuing banks or credit unions.

MasterCard was originally known as ‘Interbank’ from 1966 to 1969, but later from 1969 to 1979, its names were ‘Master Charge’ due to the alliance of numerous bankcard associations. From 1979 to 2016, MasterCard was used, and today it is ‘mastercard.’ Today, MasterCard is the world's second-largest payment processor company and has almost 18,600 employees.

History of MasterCard

Franklin National Bank issued the first modern credit card in 1951, after which more than 100 different banks started issuing credit cards. It was 1958 when Bank of America introduced ‘BankAmeriCard’, which is today known as Visa. Bank of America developed a large network of licensee banks where card members could be enrolled according to a particular geographic area and use transaction services.

A group of bankers who were not members of BankAmeriCard decided to form their own association and network where they could accept each other’s credit cards. The bankers formed the ‘Interbank Card Association (ICA)’ on August 16, 1966. The purpose of ICA was to manage the transaction through credit card payment along with overseeing authorization, clearing, and other financial settlements.

In 1974, ICA brought innovation to credit cards by introducing a magnetic strip that would ensure the authorization of the cardholder and reduce any fraud. In 1975, a system known as ‘INET’ was launched to offer an electronic exchange of transactions instead of mailing the charge slips to the card members. In 1979, ICA changed the name from ‘Master Charge’ to ‘MasterCard’. The changing of the name was necessary for the expansion of business, and in the late 1970s, Standard Chartered Bank of South Africa and Access Ltd from the UK became part of the association.

In 1985, the Card Program Development Program was formed soon after MasterCard Business card was launched for the international market. By 1986 there were almost 120 million individuals all over the world who had MasterCard. In 1986, the first MasterCard office in Pacific Rim region was opened in Hong Kong, also later in the year another office was opened in Miami for Latin America MasterCard users.

In 1988, the largest ATM network ‘Cirrus’ was acquired by MasterCard for $34 million. MasterCard also bought 15% in Eurocard International. In 1989, the MasterCard ATM Network was launched for the first time. In 1990, both the Cirrus and MasterCard ATM Network was integrated to form MasterCard/Cirrus ATM Network that was done to provide access to MasterCard holders in over 50,000 locations.

The 1990 World Soccer Cup was held in Italy, and MasterCard became a top sponsor for the global event that tremendously helped the company to get worldwide fame and recognition for its unique products and services.

In 1991, a debit payment service called ‘Maestro’ was introduced by MasterCard. In 1994, the World Soccer Cup was held in the USA, and MasterCard again became the top event sponsor that helped the company to get valuable market share and compete with Visa and American Express.

In 2002, MasterCard International division was merged with Europay International. In 2006, MasterCard International changed its name to MasterCard Worldwide. MasterCard expanded its offering in the e-commerce field by acquiring DataCash, which was a UK firm. In 2014, MasterCard acquired an Australian company called ‘Pinpoint’.

Also, in 2014, MasterCard came in agreement with Apple to launch a new mobile application for iPhone users that can help them easily use their MasterCard credit and other cards. In 2016, the logo of MasterCard was changed, and the name used was ‘mastercard’. In August 2017, MasterCard acquired Brighterion, which was based in San Francisco and provided artificial intelligence solutions.

MasterCard started trading publicly on the New York Stock Exchange on May 26, 2006, almost 95.5 million shares were sold at $39.

Current Business and Investment of MasterCard

MasterCard is a global name in the financial sector and involved in offering a wide assortment of financial products and services that connects consumers, merchants, financial institutions, and businesses. The company has a prominent name in providing efficient and effective payment solutions through credit cards, debit cards, prepaid cards, and commercial, and other payment programs. MasterCard operates through a Payment Solutions segment.

MasterCard offers a range of financial services and solutions that are offered to the customers or cardholders from the banks or financial institutions that issues the cards. MasterCard administers the network that allows the transactions between cardholders, financial institutions, and merchants. The type of products and programs that MasterCard offers include commercial credit and charge cards, debit cards, prepaid payments, commercial cards, and commercial and digital.

• Credit and charge offer users or cardholders with an option of deferred payment. A credit card gives a person a revolving balance, which means he can use the card and make payments over a certain period of time. A charge card is also a credit card, but you can make payment at the end of the billing cycle instead of making monthly payments
• Debit cards allow users or cardholders to access the funds or money available in their bank account. As a cardholder, you can withdraw the cash up to a certain limit and also use the debit card on the point of Sale when shopping from a physical or an online store
• Prepaid payments program is done through different brands of MasterCard. The company focuses on payment solutions through government programs such as Social Security payments, Employee Benefit, Commercial programs, Unemployment benefits, Health savings account, and government payroll. MasterCard also provides prepaid payment outside the US on a global scale that includes Travel cards and card services across retail stores, airlines, telecommunication, colleges and universities, and foreign exchange bureau.
• Commercial products and services are offered to small and large business companies, medium-sized corporations, and government-managed businesses. The focus of products and services is to streamline the procurement and payment processes and manage expenses and other financial information. The platforms that MasterCard offers are travel, premium, and fleet programs.
• Commercial and digital services allow cardholders to manage their transactions and payments through online platforms. You can shop and make other digital payments easily. MasterCard knows the authenticity and delicacy of online payments and ensures complete privacy and security to cardholders. There are certain authentication and validation methods along with fraud detection that makes use of digital payment easy and user friendly.

MasterCard has a valuable Advisors group that provides analytical, marketing, and consulting services and solutions. The Information group deals with all the data, information, analytics, trends, insights, and benchmark to examine current performance and take steps for future prospects. The Managed Services group is involved in customer relations management and promotional activities along with reward programs that include global airline lounge access, insurance coverages, personalized offers on popular retail stores, concierge services, and emergency cash services.

Risk and Potential in MasterCard Environment

MasterCard is a prominent name in the financial sector, and it offers seamless payment processing and transactions through credit and debit cards, electronic payments, traveler checks, and ATMs (Automated Teller Machines). The total revenue of MasterCard in 2019 was $12.49 billion, while the net income was $3.91 billion, and total assets were $21.3 billion in 2019. The SWOT analysis is a popular management tool that allows a big company such as MasterCard to inspect its business performance and financial health and take proper steps for future growth. The SWOT analysis of MasterCard is given by

• Strengths

MasterCard is a world-renowned name in the banking and financial sector. The company operates in more than 210 countries with transactions in more than 150 global currencies. There are almost 940 million users of MasterCard credit card, out of which more than 235 million credit card holders are from the US. MasterCard is a trusted brand and offers fully safe and secure digital modes of transactions. The company takes proper steps to secure transactions and reduce fraud. MasterCard Company has always been a major sponsor of sporting events such as Soccer world cups and other sports global events that increases the image and brand value of MasterCard

• Weaknesses

MasterCard has to frequently litigation matters, and there are constant risks of fraud, which impacts the financial performance of the company.

• Opportunities

MasterCard has a significant opportunity to expand in emerging economies and diversify its portfolio of financial services and programs. The world is going digital, and MasterCard can excel in further enhancing digital services all across the world and particularly in emerging Asian markets. The company can improve its digital payments unit to sustain cashless transactions, which will grow in the future.

• Threats

MasterCard has to face challenges in the form of strict economic policies in most countries of the world. The company also sees a threat to new entrants who offer various cost-effective digital payment options. There is also difficulty in compliance with changing government regulations and dealing with data breaches and cyber-attacks. The competitors of MasterCard are American Express, Visa, UnionPay, PayPal, Discover, and Amazon.

Stock Analysis of MasterCard

MasterCard Inc. is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘MA.’ The company is listed under the ‘Finance’ Sector, and the industry is ‘Finance/Rental/Leasing.’ MasterCard is also a member of other indices such as the S&P-100 Index, and S&P-500 Index.

The all-time high share price of MasterCard was $344.56 on February 19, 2020, and the average price in the last 52 weeks is $288.85.

The Coronavirus pandemic impacted the stock value of MasterCard, and there was a bearish trend observed at the end of March 2020 when Covid-19 cases peaked in the US. The share price was as low as $199.99 on March 23. However, there was a considerable rise in stock value in the second quarter with 22.4% and a further 9% increase in recent weeks of the third quarter. Analysts predict that both the credit and debit card payment will further increase in the long run on a global scale. MasterCard has experienced a constant increase in revenue since 2004, but the revenue of MasterCard fell to $3.34 billion at a 19% decrease.

The decrease in revenue is due to lockdown situations all across the world where businesses, markets, restaurants, shopping malls, and indoor entertainment venues have been closed that has limited consumer spending. MasterCard reported a record increase in e-commerce sales in May, which surged 92.7%, and total retail sales were up 22%. MasterCard has performed quite well as compared to other business companies in the Coronavirus situation, and prospects look good for MasterCard.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.