VALUATION HIGHLIGHTS

1. Services Fees constitute 30% of the Trefis price estimate for MasterCard's stock.
2. International Fees constitute 27% of the Trefis price estimate for MasterCard's stock.
3. Transaction Fees constitute 25% of the Trefis price estimate for MasterCard's stock.

WHAT HAS CHANGED?

Latest Earnings

Mastercard Q3 2025 revenue rose 17% to $8.6 billion, beating estimates, while net income climbed to $3.9 billion ($4.34 per share) from $3.3 billion a year earlier. Growth was driven by strong consumer and business spending, which lifted both payment network revenue (+12%) and value-added services sales (+25%).

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below, we look at key drivers for Mastercard and the potential upside or downside for the company's stock.

• Transaction Processing Revenue: Mastercard charges its customers a transaction processing fee for providing them with its network and infrastructure to carry out transactions. The company's revenue from transaction processing has increased from $8.7 billion in 2020 to $10.6 billion in 2022, growing at almost 8% on an average annual rate. The metric stood at $13.6 billion in 2024.
  Given the healthy macroeconomic environment, we expect the company's revenue from the division to grow strongly in the near term and gradually in the long run. We expect the revenue to increase to $28 billion by the end of the forecast year. However, if the global markets become volatile and the transaction processing revenue reaches only $20 billion by the end of our forecast period, there could be a downside of 15% to our current price estimate.


• Cross-border Revenue: A significant part of Mastercard's revenues comes from the fees it levies on cross-border transactions. A cross-border transaction is a transaction in which the cardholder's country is different from the merchant's country. Mastercard levies a cross-border fee and a currency conversion fee for any transaction made outside of the cardholder's country. The company's revenue from cross-border transactions has increased from $3.5 billion in 2020 to $10.2 billion in 2024.
  Given the healthy macroeconomic environment, we expect the company's revenue from the division to grow strongly in the near term and gradually in the long term. We expect the revenue to increase to $27 billion by the end of the forecast year. However, if the global markets become volatile and the transaction processing revenue reaches only $18 billion by the end of our forecast period, there could be a downside of 10% to our current price estimate.

BUSINESS SUMMARY

Mastercard is the second-largest global payment solutions company in the world. It provides a variety of services to support credit, debit, and related card solutions of over 25,000 financial institutions globally. The company generates revenue by charging fees for transaction processing and other services. The company's brands include Mastercard, Maestro, and Cirrus.

SOURCES OF VALUE

Mastercard generally charges its customers on a per-transaction or percentage-of-transaction basis, so its revenues are primarily impacted by the number of transactions it processes and the total dollar volume of purchases made using its cards.

Mastercard's revenues primarily come from the following sources:

Transaction Processing Fees

Mastercard acts as a transaction processing service for its customers. The company authorizes, clears, and settles all transactions made using its cards. Mastercard also allows customers to use its network and infrastructure to carry out transactions. In exchange for these services, Mastercard charges a Transaction Processing Fee.

Cross-border Volumes

A major part of Mastercard's revenues comes from the fees it levies on cross-border transactions. A cross-border transaction is a transaction in which the cardholder's country is different from the merchant's country. Mastercard levies a cross-border fee and a currency conversion fee for any transaction made outside of the cardholder's country.

Domestic Assessment Fees

Assessment fees are charged to the bank that issued the card. These fees are based on the gross dollar volume (GDV) for a specific period. The rates vary depending on the nature of transactions and the region.

Other Revenue - Services Fees

For our analysis, we have included acceptance development fees, warning bulletin fees, consulting and research fees, and other fees such as penalty fees, hologram and publications fees as Services fees.

Rebates and Incentives (Contra-Revenues)

Rebates and incentives are paid to customers and merchants to encourage card issuance for the acceptance of Mastercard-branded cards. These are contra-revenues and vary with the Gross Dollar Volume. Rebates are given both on operations fees and on assessments.

KEY TRENDS

Rapid growth in electronic, cashless payment solutions

Mastercard provides cashless payment solutions to customers worldwide. These include payments made using credit cards, debit cards, and prepaid cards. The market for such transactions is growing at a rapid pace as growth in emerging economies outpaces that of the U.S. Card transactions have experienced explosive growth in the Asia-Pacific region. We expect this growth to gain momentum as more people and merchants adopt credit and debit cards.

Mobile payments on the rise

Mastercard offers special payment solutions to enable the payment of bills from mobile phones. Mobile payments have been growing at an impressive rate, and we expect this to continue as mobile payment solutions become more secure and more consumers use smartphones. This should provide a substantial growth opportunity for the company. Mastercard has also tied up with Apple and Samsung Pay.