Stocks
by Kate Wilson on January 31, 2020

Visa and MasterCard on their way to become $1 trillion companies

The stock market has long been dominated by Tech and Internet giants, who pioneered their way to becoming first companies to breach the $1 trillion stock market value barrier, but there are new runner-ups with high ambitions of joining the elite of the stock market club.

Visa Inc and Mastercard Inc have been skyrocketing through the market value charts, their rise fueled by rising stock prices. Just last year, both Visa and Mastercard have witnessed their stock prices rising by 50%, putting them in prestigious 7th and 11th places respectively, among US companies ranked by S&P 500 stock market index.

Should they maintain the impressive pace of their stock gains, as they have been doing for the past three consecutive years, Visa and Mastercard can expect to breach the $1 trillion barrier as soon as 2023, leaving behind such companies as Social Media giant – Facebook Inc and the American multinational titan – Berkshire Hathaway Inc.

Catalyst for rising

So what is the driving force behind this impressive, continuous rise in stock prices? The answer lies in the combination of shifting priorities towards cashless payments and a surge in online shopping.

Both Visa and Mastercard have been making moves in an effort to upscale their value-chain beyond more traditional payment methods, those being card payments, into the booming field of cardless, digital payments

Earlier this year, Visa announced its acquisition of Plaid, a Fintech API startup from San Francisco, for mindboggling $5.3 billion, to better integrate itself into the growing fintech industry. This acquisition was preceded by the purchase of Earthport, a company providing solutions for cross-border payments. MasterCard has not been sitting idly either, making its own moves in a bit to shift towards digital payments, purchasing Vocalink, a fintech startup offering services for the transaction of funds between accounts.

Digital payments have been on the rise for the past decade. Last year, nearly half of all consumer purchases globally, not including China, were made through digital payments, which is a significant increase since 2010, when digital payments accounted for 28% of total annual consumer purchases.

The formula for the success of these industry giants lies in their extremely comfortable position in the world of payment, playing a key role between banks, merchants, and consumers.

At the moments, Visa and Mastercard hold lions share of the credit card market, having 60% and 30% of the total market shares respectively. American Express has been lagging behind significantly, with only 8.5% of shares to its name.

Olympus of the Stock Market

Apple, Microsoft, and Alphabet – the parent company of Google are comfortably positioned at the top of the stock market, up to this point being the only companies to achieve the coveted status of $1 trillion stock market value and staying there.

Amazon, the e-commerce titan, which has been hovering around $927 billion for quite some time, has managed to break the $1 trillion thresholds, joining the luxurious $1 trillion club, the second time since doing so briefly back in 2018.

As of Thursday, Visa stood at $449 billion stock market value, while Mastercard had $324 billion. These numbers mark the highest that these industry giants have seen in the past decade. The skyrocketing stock values come amid the 10-year-long bull market in the US, and should any downturn take place, it has the potential to significantly stall the long-running rise in gains.

While 2020 was opened with a strong headstart, the Coronavirus outbreak in China has slowed down the upwards march.

The biggest risk in the coming years is represented by the growing competition in the payment field, with competitive fintech startups popping up with innovative technologies, and big tech firms entering the market with new services.

However, neither Visa nor Mastercard have been idle, showing increased willingness to pay top coin for fintech firms with established positions in the field of digital payments, in an effort to maintain relevancy in the payment sector and diversifying their assets.

By Kate Wilson

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