Mastercard
Thesis
- Two-sided acceptance / scale. Asset light. Clash displacement. Service attach. Cross-border volume with higher margin. Licensed position in China JV and UAE Switch.
- Risks to watch:
- Client incentives / issuers pricing power.
- Debit and prepaid (half the volume) is exposed to replacement by state rails.
- Litigation tail.
Visa versus Mastercard
Mastercard versus American Express
- Mastercard has faster growth and stronger margin conversion. AXP breaks first in a downtown.
- Mastercard has faster growth across cross-border, value added services, and non-US.
- Margin gap due to different business model. AXP pays for rewards, card benefits and credit losses out of its own P&L, which is about 50% of revenue.
- AXP earns 4.6 times more pretax profit per dollar of spend, but need to maintain it with $152.5B of deposits, a 10.5% CET1 ratio, credit risk, and Delta at 13% of billed business.
