Mastercard’s sales and earnings rose in the last quarter of 2024, led by solid holiday consumer spending and the acquisition of the privately held cybersecurity company Recorded Future.
Mastercard CEO Michael Miebach heralded the fourth-quarter financial performance, highlighting the company’s strengths.
“Our diverse capabilities in payments and services and solutions—including the acquisition of Recorded Future this quarter—set us apart and position us well for long-term growth as we outlined at our Investor Day,” he said in a statement following the release of the company’s financial report. “That value is seen in the continued momentum of our new and expanded wins.”
Georgios Koimisis, an economics and finance associate professor at Manhattan University, sees Mastercard’s substantial fourth-quarter revenue and profit gains as a clear sign of steady consumer spending in a relatively stable economy.
“This reinforces the trend of increasing digital payments worldwide, as more people and businesses continue moving away from cash,” he told The Epoch Times via email. “Mastercard’s extensive global network further supported its results, highlighting its broad market appeal.”
Koimisis commends Mastercard’s network, which extends far beyond traditional card transactions by investing heavily in cybersecurity and analytics. “This approach addresses emerging payment trends and safeguards against potential risks,” he said.
In addition to a strong U.S. economy, the transaction-processing industry faces several more tailwinds. One of them is a movement by governments worldwide to favor credit card transactions over cash transactions and boost tax revenues.
Another tailwind is the proliferation of transaction-processing technologies and devices, which makes it much easier to make credit card payments, even for small transactions.
Meanwhile, the industry operates in an oligopoly market environment, thanks to economies of networking, and the benefits associated with an extensive network of users, customers, and merchants. Economies of networking make it almost impossible for new companies to enter the market, providing existing companies with a great deal of pricing power, as evidenced by the steady transaction fees.
Pricing power, in turn, translates to persistently high profit margins, which equity analysts follow closely to determine the soundness of different investments. Mastercard’s operating margin has recently been more than 50 percent.
However, the U.S. Congress has taken up the issue of credit card transaction fees, examining different proposals to open the industry to competition.
“Estimates vary, but recent data suggests that in 2022, swipe fees were around $160 billion, with credit card transactions comprising the majority of fees paid. Recent proposals to regulate credit card swipe fees have aimed to lower fees through routing rules similar to those applied to debit cards since 2010—specifically, removing transaction routing restrictions that create barriers to competition and prohibiting networks from requiring banks to issue cards that would run only on their networks.”
That makes Jason DeLorenzo, a leading expert in options trading and market dynamics, concerned about Mastercard’s future performance.
“Mastercard and Visa are under scrutiny from regulatory authorities since they have a monopoly in the credit processing network space,” he told The Epoch Times via email.
“While earnings are strongly up, fundamental headwinds are on the horizon. In the short term, however, enjoy the record earnings.”
