) has entered into an agreement with China UnionPay Data Co.,
expanding its presence in China and likely raising revenues for
both companies by adding locations where their cards are accepted.
Mastercard is the second largest global payment solutions company
in the world and provides a variety of services to support credit,
debit and related card payments globally. Its main competitors are
), Diners Club and JCB.
We have a price estimate of
for MasterCard's stock, which stands below market price.
See our full analysis and $214 price estimate for
Growth in China's Credit Card Market
As China is predicted to overtake the U.S. as the largest market
for credit cards by 2020 with about 900 million cards in
circulation, payment service providers like Visa and MasterCard are
looking for an entry point in the Chinese market to grab a piece of
this growing market. Total cards in China is expected to increase
11% annually and transaction value is expected to climb 14%
annually until 2025.
China UnionPay is the sole bank card transaction processing
company in the region and the biggest card company globally in
terms of card issuance and the second largest brand in the
Asia-Pacific region in terms of transaction volume. Foreign credit
card companies are barred from transactions in the Chinese market
and international cards are not accepted in China. The partnership
between MasterCard and UnionPay would help both companies reach a
wider base of customers.
Visa Inc. clashed with UnionPay in June last year and complained
that China is violating trade rules by denying international
payment processing companies an entry into its market. The U.S.
Trade Representative, Ron Kirk, was looking to file a complaint at
the World Trade Organization over the rules which block companies
such as MasterCard, Visa, American Express Co. and Discover
Financial Services from processing credit and debit card
transactions in China.
Upside to MasterCard
Penetration of electronic payment is still low in China. Of
China's $3 trillion personal consumption market, China UnionPay
accounts for about a third of the payment processing. The remaining
two-third of the market is settled through cash. Thus, there is
ample scope for MasterCard to increase its number of transactions
processed by partnering with China UnionPay. We currently estimate
that the number of transactions processed by MasterCard will
increase from 23 billion in 2010 to about 57 billion by 2017, at an
annual growth rate of roughly 14%.
Drag the trend line in the modifiable chart above to see how
various trends in the number of transactions processed affect
MasterCard's stock value.