Mastercard (NYSE:MA) has a whole new generation of growth to look forward to.
Known to many baby boomers and Gen X-ers as one of the top credit card brands in the marketplace, MA is expanding into the digital payments and processing space powering Millennials and Gen Z-ers in a rapidly growing cashless world.
Basically, Mastercard is a company that plays the middleman between a consumer and a bank. It covers purchases from individuals (or businesses) so the bank can debit the account for the money. Any balance on the card draws interest that the bank and MA cut.
The merchant pays MA a fee for being the middleman and the banks pay MA for guaranteeing the payment until the money clears. Any balance on the card gets charged interest that the bank and the processor split.
It’s a win-win for all concerned, with the end goal that it makes it easier to spend money and access credit for the consumer. It also increases revenue for the merchants, banks and MA.
And since 1966 – first known as Interbank – MA has been a major player in the industry, nationally and internationally.
MA Stock Adapting to Expanding Cashless Economy
But now we’re in the midst of the digitization of money. A cashless world. Some stores are even experimenting with cashless stores.
Remember that financial institutions have been doing things pretty much the same way for decades. Banks still make money by making loans. But now, there are neo-banks, business development corporations, and many other companies that are getting in on banks’ core profit machines.
So, banks have been adapting to the new world and going digital. And that’s pretty complicated.
MasterCard has always been a leader in the payment processing business. And now that things are becoming digital, it’s all moving MA stock’s way.
For example, just this week, MA announced a partnership with Evolve Bank & Trust to help make it faster for workers in the gig economy to get paid. Creating a friction-less payment system where employers can pay workers with an interest-free loan for service nearly in real time would be a huge step forward for gig economy workers.
And if you’re worried about bitcoin or the blockchain overtaking MA, don’t. Mastercard can process tens of thousands of transactions in seconds, whereas blockchain takes much longer because of its structure. It will be a valuable tool in payment processing platforms, but not on the transaction end.
This is the reason MA stock continues its success. In the past three years, MA stock is up 193%. Year to date, it’s up 50% and we’ve just reached the halfway mark.
My Portfolio Grader gives MA stock a B at this point, mainly because the economy is giving off mixed signals here and lower interest rates may slow its pace of growth. But it will certainly continue to grow well into the future.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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