Visa Will Remain Payments Industry Leader By Rapidly Growing Cross-Border Payments Business

Visa (NYSE: V) and Mastercard (NYSE: MA) were in a long-drawn tussle earlier this year to acquire Earthport, as both payment giants look for ways to tap into the growing cross-border payments business. In the Trefis interactive dashboard, How Do Visa and Mastercard Make Money, And How Have Their Revenues Changed Over The Years? we observe that Visa’s cross-border revenues have grown in the recent past at a much higher rate than Mastercard’s. We also capture trends in key operating metrics for Visa and Mastercard over the last decade – parts of which are summarized below. Additionally, you can find more of our financial services sector data here.

Comparison of Key Operational Metrics

• Payments volume is core to Visa’s and Mastercard’s growth, as it represents the dollar value of activity on their respective network primarily to make purchases using debit/credit cards (excluding cash withdrawal).
• Visa’s payments volume has been roughly twice that for Mastercard over the last decade. In 2018, Visa’s and Mastercard’s payments volumes were $8 trillion and $4 trillion, respectively.
• Over recent years, we observe that data processing and services fee for Visa and Mastercard have been similar at ~0.22% of payments volume.
• However lately, Visa’s cross-border fee as a percentage of cross-border payments volume has been lower than that of Mastercard, primarily due to the acquisition of Visa Europe in 2016. Per Trefis estimates, cross-border fees for Visa and Mastercard were 0.37% and 0.44% of payments volume in 2018, respectively.
• Visa recognizes cross-border fee for international transaction processing as well as currency conversion while Mastercard clubs the international transaction processing component with its data processing revenues.
• Keeping their revenue recognition policies in mind, we observe that Visa charges a much lower fee than Mastercard for an international payment transaction. That said, the actual fee paid by the end user is very likely identical, with the multiple parties involved in the payment process taking a different proportion of the total fees when processing payments with Visa or Mastercard.

Comparison of Revenue Streams

• Over the last decade, data processing revenues for Visa and Mastercard have grown at a similar level of 15-16% CAGR.
• Notably, though, Visa was able to maintain a higher share of the international payment processing market over the period from 2008 to 2016 despite Visa Europe being a separate entity (figures for which are not included here). In 2018 , Visa’s cross border revenues were $7.2 billion in comparison to Mastercard’s $5 billion, and have been growing at a faster rate.

With the acquisition of Earthport, a headway in utilizing Hyperledger Fabric for B2B transfer, and lower cross-border fee, Visa has been strengthening its position in the highly contested cross-border payments market. While Mastercard has tried to match pace with Visa with its acquisition of Transfast, we believe that Visa will retain its leadership position over the foreseeable future.

Stay tuned for our analysis on the impact of distributed ledger technology on Visa’s and Mastercard’s operational costs over coming days. Additionally, you can view our interactive dashboards on Visa, Mastercard, American Express, and Discover Financial to modify key revenue drivers and observe the impact on their stock price.

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