A Layman's Guide to Visa, Mastercard, & American Express Post Earnings ...
Things you should know about 3 of the card/payments giants in the market and how to play them.
Visa, Mastercard, and Amex process about $26 trillion in transaction volume each year. For those of you wondering, if you stacked $26 trillion worth of $100 bills they would measure about 17,268 miles high. And while that still gives most of us zero context, if you stacked those hundred dollar bills and took them on a trip, they would make it three quarters of the way around the circumference of the world, an insane distace to think about.
If you’re newer to the card space, this article is for you. And because I’m incapable of writing research report style dissertations, here you get a to the point narrative on the big three card companies.
Who Are They Really?
Think of Visa as old reliable. The biggest & most boring. Built for scale. Catering to everyone from casual debit card users to global corporations. They process about $14.5 trillion in total payments volume annually. That’s a lot.
Mastercard on the other hand is a bit craftier. Faster. More flexible. Trying to innovate. And leaning harder into tech, B2B, and cross border transactions (aka travelers). They do about $9.5 trillion in total payments volume annually.
And then there’s Amex. The slightly snooty, exclusive, high-touch, and status symbol card. It caters to affluent consumers and business owners. Top tier rewards and premium service. They do about $1.8 trillion in total payments volume annually.
So each service slightly different customers, but another difference is that Amex actually holds credit risk, lending money like a bank and some of the other card companies.
Visa and Mastercard don’t. They are more like the toll booths collecting pennies on each transaction they process. The only thing they want is, you guessed it, more car traffic. If no one is on the road, they don’t make money.
We’re All Just Cyclical.
All companies are cylical to some extent. Almost all at least.
If I had to give you a spectrum of cylicality, card and payment companies in general would probably sit somewhere in the middle of the spectrum
They’re not staples (like P&G or Walmart) or utilities that are fairly recession proof. Nor are they healthcare, which still gets used whether times are booming or not.
At the far other end of the spectrum they’re not retail or travel (American Airlines, Hilton) which are super sensitive to the economic cycle and how much extra cash is in the consumers pockets.
So I’d put Visa & Mastercard somwhere in the middle. And we could call them “recession resistant” because while spending overall would slow down in a bad economy, people still would buy groceries, pay bills, and make essential purchases (like YOLO’ing 0DTE calls on Robinhood). Their revenue growth slows, but rarely turns negative.
American Express on the other hand is slightly more cyclical because like I mentioned earlier, they hold credit risk. And in a down market, they have less spending and ostensibly some charge-offs in loans. But an odd thing is happening with Amex in that since they cater to rich customers and since the Fed has contributed to massive wealth inequality (facts prove this) it’s almost as if their customrs have become “recession proof” in the traditional sense. In theory Amex should be cyclical, but maybe not in practice.
And if I were looking at these companies relative to my beloved cyclical banks, Visa and Mastercard are definitely less cyclical, while Amex is probably right in line.
What Kind of Numbers Are They Putting Up?
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