When it comes to payment processing, two names immediately come to mind: Visa and Mastercard. These two giants of the global payments industry have been battling for supremacy for decades, with each holding a significant share of the market. But who is bigger, Visa or Mastercard? To answer this question, we need to delve into their history, business models, and financial performance.
Visa Inc. was founded in 1958 as BankAmericard, later renamed Visa International Service Association (VISA). In 1974, the company adopted its current name and became a publicly traded company. Visa's primary business model is to facilitate transactions between merchants and cardholders by charging interchange fees on each transaction. As of 2021, Visa operates over 300 million cards worldwide and has partnerships with over 200 million merchants.
MasterCard International Incorporated, on the other hand, was founded in 1966 as Master Charge, later renamed MasterCard Worldwide. The company also went public in 1979 and operates under a similar business model as Visa, charging interchange fees on each transaction. MasterCard has a slightly smaller global footprint than Visa, with approximately 288 million cards issued as of 2021 and over 28 million merchants.
When comparing the size of Visa and Mastercard, one might assume that Visa, with more than twice the number of cards issued, must be the larger company. However, when looking at the total number of transactions processed, Visa tends to lead. According to data from eMarketer, Visa processes around 111 billion transactions annually, while MasterCard processes around 89 billion. This suggests that Visa may have a slight edge in terms of volume, but not necessarily in terms of market capitalization or revenue.
To understand the financial performance of Visa and Mastercard, we need to look at their annual reports. As of 2020, Visa reported total revenues of $21.9 billion, while MasterCard reported revenues of $20.9 billion. Both companies have seen steady growth in their revenues over the years, with Visa growing at an average rate of around 5% per year and MasterCard at around 4%. However, Visa's revenue growth has been slightly higher in recent years, indicating that it may be gaining market share.
Another key metric to consider is profitability. Visa reported net income of $4.3 billion in 2020, while MasterCard reported net income of $3.9 billion. Again, Visa's net income has been growing faster than MasterCard's, suggesting that it may be more profitable. However, both companies have shown strong profitability over the years, with margins consistently above 20%.
In terms of market capitalization, Visa is the larger company. As of early 2021, Visa had a market capitalization of around $400 billion, while MasterCard's market capitalization was around $350 billion. This difference in market cap can be attributed to various factors, including the fact that Visa has been publicly traded longer and has a larger share of the global payments market.
Looking at the future, both Visa and Mastercard face challenges and opportunities. One major challenge for both companies is the rise of alternative payment methods, such as digital wallets and cryptocurrency. These new technologies are disrupting traditional payment systems and could potentially reduce the need for plastic cards. However, both Visa and Mastercard have made efforts to adapt to these changes, offering their own digital wallet solutions and working with cryptocurrencies.
Another opportunity for both companies is the growth of e-commerce and online shopping. With the COVID-19 pandemic accelerating the shift towards online shopping, both Visa and Mastercard have expanded their digital capabilities to cater to this growing demand. Visa, for example, has launched a program called Visa Direct to help small businesses accept online payments.
In conclusion, while Visa has a larger market capitalization and appears to be leading in terms of transaction volume, MasterCard is not far behind. Both companies have strong financial performance and continue to adapt to changing market conditions. The real competition between Visa and Mastercard lies in their ability to innovate and maintain their dominance in the global payments industry. Only time will tell which company will emerge as the clear winner in this ongoing battle.