) is the second largest global payment solutions company in the
world. It provides a variety of services to support the credit,
debit and related card payments of over 24,000 financial
institutions globally. MasterCard competes with Visa (
). Below we look at the four most important division driving our
$293 price estimate for MasterCard,
which is around 17% ahead of the current market price.
Rise of Mobile Payments a Catalyst
The number of mobile payment users have been rising fast with
351 million users in 2009 which is estimated to reach 1.06 billion
by 2014 at a compound annual growth rate of 20.5%. Global mobile
payments transactions are expected to rise to $1.13 trillion in
2014 from $37.4 billion in 2009, at an annual growth rate of 98%.
We expect this to benefit card companies like MasterCard, Visa and
The 4 Most Important Divisions for MasterCard
- represents 32% of the company's stock value
MasterCard acts as a transaction processing service for its
customers. All transactions made using MasterCard branded cards are
authorized, cleared and settled by MasterCard. MasterCard also
provides customers its network and technical infrastructure to
carry out transactions in a fast and easy method. In exchange for
these services, MasterCards charges its customers a transaction
2) International Fees - represents 29% of the company's stock
A major part of MasterCard revenues come from the fees it levies
on cross-border transactions. A cross-border transaction is a
transaction where the card holder's country is different from
the merchant's country. MasterCard levies a cross-border fee and a
currency conversion fee for any transaction made outside the
3) Assessment Fees - represents 21% of the company's stock
Assessment fees are charged to the to the card issuing bank.
They are based on the gross dollar volume (
) for a specific time period. The rates vary depending on the
nature of transactions that generate GDV and by region.
4) Services Fees - represents 9% of the company's stock
For our analysis, we have included acceptance development fees,
warning bulletin fees, consulting and research fees and other
fees such as penalty fees, hologram and publications fees as
See our full analysis for MasterCard.