MasterCard (
MA
) 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 (
V
) and
American Express
(
AXP
). In a recent note we looked at what drivers are propelling
MasterCard's business like mobile payments and the increasing use
of electronic payment methods - see
2
Key Value Drivers for MasterCard
.
Below we look at the two most business divisions for MasterCard
which have significant impact on its stock price and our
$293 price estimate for MasterCard.
2 Most Important Divisions - A Snapshot
1) Transaction Fees - 32% of the company's stock value
MasterCard operates its MasterCard Worldwide Network, which
links issuers and acquirers around the globe for transaction
processing services and, through them, permits MasterCard
cardholders to use their cards at millions of merchants
worldwide.
In a transaction, MasterCard charges issuers and acquirers a fee
for the network and the services it provides for a transaction to
go through. Transaction fees is one the major revenue source
for MasterCard and includes authorization, settlement and switch
charges as well as connectivity charges. In 2010, MasterCard
processed 22.6 billion transactions and generated $3.3 billion
revenues.
See the top forecasts for the transaction fees
2) International Fees - 29% of the company's stock value
International fees contribute a major percentage of MasterCard
revenues because of the higher fees that MasterCard charges on
international transactions. The international transaction revenues
include transaction fees and other special fees
like cross-border fee and currency conversion fee. In
2010, MasterCard charged a currency conversion and cross-border fee
off 1% of the transaction amount.
The currency conversion fee was 0.2% of the transaction amount
and the cross border fee was 0.8% of the transactions amount.
MasterCard generated about $2.7 billion revenues from international
fees in 2010.
See the top forecasts for the international fees
See our full analysis of MasterCard here