Mastercard’s 3 revenue components (1) Domestic Assessments, (2) Transaction Processing, and (3) Cross-Border Fees, expected to contribute roughly $6.8 billion (28%), $8.3 billion (34%), and $6 billion (23%) to its Gross Revenue estimate of $25 billion for full-year 2019
2019E Revenue Breakdown:
Domestic Assessments = 28%Transaction Processing Revenues = 34%Cross-Border Volume Fees = 23%Other Revenues = 16% Rebates & Incentives = 32%
Mastercard's Business Model
Visa is the largest global electronic payment solutions company in the world and provides its clients authorizing, clearing and settling of transactions, and other support services.
It operates as an open-loop payments network, where it does not act as an Issuer (financial institutions that issue credit/debit card to customers) or an Acquirer (financial institutions that acquire merchants to increase credit/debit card acceptability).
Visa only acts as a payment processing platform with four global processing centers located in the United States, Singapore, and the United Kingdom.
Has 5 Operating Segments-
1. Service Revenues: These are services provided in support of client usage of Visa products. The charges are recognized a function of payments volume (dollar volume of activity on Visa Network) generated by the client.
2. Data Processing Revenues: Transaction processing services involve routing of payment information and related data to facilitate authorization, clearing, and settlement of transactions on Visa network. We also recognize these services as a function of payments volume.
3. International Transaction Revenues: There are earned on cross-border transaction processing and currency conversion services by Visa.
4. Other Revenues: These consist of license fees, account holder fees, optional services, and product enhancement charges.
5. Client Incentives: These are rebates offered to financial institutions for entering into a long-term contract with Visa to enhance the acceptance of Visa products.
What Are The Alternatives?
Open-Loop Payment Processing Industry: Visa is the global leader in payment processing with nearly $8 trillion of payments volume processed on its network in 2018. Mastercard is the direct competitor to Visa and processed nearly $4 trillion of payments volume in 2018.
Closed-Loop Payment Processing Industry: American Express and Discover are alternatives to Visa but, operate a closed-loop payment network (The company acts as an issuer and acquirer). In 2018, payments volume of American Express and Discover were around $1.2 trillion and $376 billion, respectively.
What Is The Basis of Competition?
Competition is based on network’s acceptance, availability, service quality, and cost.
How have Mastercard's earnings fared in recent years?
Total Operating Expenses
Mastercard's operating income has increased from $5.1 billion in 2015 to $7.3 billion in 2018.
You can modify the various revenue drivers for Mastercard in the charts below.
Step 1: Determining Payments Volume
Total Number of Cards in Circulation
Payment Volume per Card
Step 2: Determining Data Processing Fee and Assessment Fee
Data Processing Fee as a Percent of Payments Volume
Assessment Fee as a Percent of Payments Volume
Data Processing Fee is used to determine Data Processing Revenues, which is a function of Payments Volume.Assessment Fee is used to determine Service Revenues, which is a function of Payments Volume.
Step 3: Determining Cross-border Volume Fees and Other Revenue
Cross-border volume fees
Income Tax Rate
Diluted Weighted-Average Shares Outstanding
Mastercard's earnings per share increased from $3.35 in 2015 to $5.60 in 2018.
DISAGREE WITH OUR FORECASTS? CREATE YOUR OWN
1. How to save your forecasts
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can see how well you forecast the company's performance at the end of each period and compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.