What Are MasterCard’s Key Sources Of Revenue?

by Trefis Team
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MasterCard (NYSE: MA) has seen its revenue grow at a CAGR of 13% and its stock price tripled between 2013 and 2017. The company has seen a significant growth in its transaction volumes, supported by the transition towards digital payments and Master Card’s expansion. The company’s focus on improving technology to enhance payments and securitize the process has helped it expand its customer base and co-branding partners, and consequently led to significant growth in revenues. One downside for the company was that client incentives and rebates grew faster than overall revenue growth at 19% annually.

Our price estimate for MasterCard’s stock stands at $150, which is below the market price. We expect the company’s overall revenues to grow by nearly 20% in 2018. Our interactive dashboard shows the historical trends and our expectations for the company’s FY’18 top line; you can modify the key value drivers to see how they impact the company’s results.

Transaction revenue accounts for a third of MasterCard’s overall revenues. MasterCard’s transaction volumes have grown at 12% annually since 2013. Improvement in consumer spending and recovery in economic conditions have driven 15% annual growth in revenues from these transactions.

International transaction fees account for 23% of overall revenue. Improved consumer spending and increasing international adoption of credit cards, in addition to the company’s entrance into the developing markets have driven International GDV and revenue by 11% annually.

MasterCard’s U.S. Gross Dollar Volume is largely dependent on the willingness of consumers to spend more money. The total revolving credit, owned and securitized, outstanding across the U.S. is one of the measures used to gauge this trend. As the U.S. economy showed signs of recovery, this value increased from around $857 billion in 2013 to $1028 billion by 2017 and consequently drove Mastercard’s GDV at 4% annually since 2013. With increased adoption of MasterCard products across the U.S. and mobile payments, MasterCard’s assessment revenues have grown at 9% annually.

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