Visa and Mastercard in my book
I have introduced the two credit card issuers Visa (ticker: V) and Mastercard (ticker: MA) in detail in Sections 2-3 of the book “The Rules of Super Growth Stocks Investing“, if you are not clear about the basic business, moat, market share and other important issues of these two companies, I suggest that readers refer to this small chapter in my book.
Business model
Toll station model
The best business model in Buffett’s eyes──the “toll booth” model.
No need to bear losses or liability
Visa and Mastercard Credit Card Network are two companies that are rare in the business world and have a business model that hardly needs to bear losses. The reason is that the two companies, Visa and Mastercard Credit Card Network, do not issue credit cards themselves, but are issued by member banks that have joined the Visa and Mastercard Credit Card Network. Moreover, almost all commercial banks in the world issue Visa and Mastercard credit cards.
If the cardholder suffers losses due to fraud, the issuing bank will be responsible for them and has nothing to do with Visa or Mastercard. In the same way, if a cardholder defaults on a card debt for a long time, the debt will be recorded in the account of the issuing bank and has nothing to do with Visa or Mastercard.
Invisible and low-key champion
Visa has a trading volume that is ten times that of retail giant Walmart, and its market value is more than twice that of General Electric. Visa’s success lies not only in its scale, but also in its almost invisible construction of a truly “invisible and low-key” global business empire with far-reaching influence.
The value
Control global payment network
It is the second and third largest credit card network system in the world, second only to China’s UnionPay card.
Duopoly
high profit margin
Among the large companies listed on the U.S. stock market, Visa and Mastercard Credit Card Network are two famous companies with high profit margins. Among the large listed companies in my memory, except for Arm (ticker: ARM) Apart from these two companies, it seems that no other company is higher than these three companies.
Table 1 in Section 2-4 of my book “The Rules of Super Growth Stocks Investing” lists for readers a ranking of high-profit-profit companies among large companies listed on the US stock market. There are 11 companies in total for readers’ reference.
Business scale
Card issue scale
Today, JPMorgan Chase Bank is the world’s largest issuing bank of VISA cards. VISA is currently issued in more than 200 countries and regions around the world.
How many Visa and Master cards worldwide?
According to the information in the financial report released by Visa in the third quarter of 2023, the total number of Visa cards issued worldwide is 4.26 billion; of which 1.279 billion are Visa credit cards, and the Visa debit card financial There are 2.981 billion cards.
According to the financial report of Mastercard in the first quarter of 2024, the total number of Mastercard cards issued worldwide is 3.4 billion.
How big is the transaction volume?
Visa
According to information in the financial report released by Visa in the second quarter of 2024, the global Visa card transaction volume in the quarter was US$3.95 trillion; of which the United States accounted for US$1.803 trillion, and non-US accounted for 2.147 trillion US dollars.
According to the information in the financial report released by Visa in the third quarter of 2023, the global Visa card transaction volume in that quarter was 56 billion transactions.
Mastercard
According to Mastercard’s financial report, in the second quarter of 2024, the global Visa card transaction volume in that quarter was US$2.403 trillion.
According to the information in the financial report released by Mastercard in the second quarter of 2024, the transaction volume of Mastercard globally in the quarter was 47.382 billion transactions.
What is the maximum transaction capacity?
Visa announced in 2018 the global transaction network of Visa credit cards:
- Capable of processing 24,000 transactions per second.
- Connected to 15,500 financial institutions, surpassing SWIFT’s 11,000+ connected institutions.
The only risk
The only risk From the above discussion, it can be seen that Visa and Wanshida Credit Card Network have the best business models in the world. The only operating risk for these two companies is regulatory risk.
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