Credit Card Weekly Recap – MasterCard, Discover, Visa
Credit card company stocks gained during the week ended November 28, led by Visa (NYSE:V), continuing the upward movement that began with better than expected earnings reports for the September quarter. During the week, MasterCard (NYSE:MA) announced the launch of debit card service in Canada and the launch of MasterPass service in the UAE. Also during the week, a survey conducted by Discover Financial (NYSE:DFS) revealed higher anticipated spending by consumers during the holiday season in the U.S. Lastly, below we explain the reasons behind the lawsuit filed by Discover against Visa.
Market Expansion With New Launches By MasterCard
This week MasterCard launched its digital payment service, MasterPass, in the UAE. MasterPass is the company’s global digital service, which is now operational in 13 countries worldwide. MasterPass is a digital wallet service which, in addition to payment convenience and security, also allows storage of shipping information. In the UAE, MasterCard has partnered with three local banks to offer the service. [1]
In an effort to boost its debit card business outside the U.S., MasterCard announced its plan to launch the service in Canada next year. The company is eyeing an opportunity due to the increasing use of smartphones to make payments and a growing trend of debit payments in the country. After cash, debit payment is the second most popular mode of payment in Canada, with nearly 24% of retail payments in the country. [2]
See our full analysis of MasterCard here
Discover Expects Increased But Disciplined Holiday Spending
Earlier in the week, Discover released results of a survey of consumers commissioned by the company. According to the company, consumers are showing improved enthusiasm as the holiday shopping season commences compared to the previous year. [3] The survey exhibited that a majority of consumers have a pre-planned budget for shopping during the holidays.
Discover’s stock gained about 1% during the week, largely due to movement in the overall market. We have a price estimate of $65 for the company’s stock, translating into a valuation of nearly $30 billion, which is about in line with the current market price.
See our complete analysis of Discover Financial here
Discover Sues Visa
Discover filed a lawsuit against Visa in a federal court in the U.S. for following anti-competitive practices in the debit card space. [4] As part of its rules, Visa requires financial institutions issuing the Visa signature debit cards to include Visa PIN services. Regulatory rules require financial institutions to include at least two payment networks, one of which a merchant can chose to route the payment. Discover claims that Visa gives incentives to merchants to only opt for Visa’s network, thus barring merchants from using Discover’s Pulse network. Going forward we will be closely following developments related to the issues raised by Discover in the lawsuit.
See our full analysis of Visa here
Notes:- MasterCard Launches MasterPass in the UAE, MasterCard Press Release [↩]
- MasterCard to Launch Debit Card Service in Canada in 2015, The Wall Street Journal [↩]
- Shoppers Are Budget Savvy This Holiday Season, Discover Press Release [↩]
- Discover Sues Visa Over Debit-Card Practices, The Wall Street Journal [↩]