Mastercard Continues Steady Climb
Mastercard has been on quite the run lately. After breaking through the $300 mark in early January, momentum has continued as the stock is already up almost 10% in the first 3 weeks of the year. Mastercard (MA) was one of the recommendations in the Macrowise Shopping List for premium subscribers. Some of the premium content is also available in the Real Vision Think Tank.
Trade Deal Brings New Growth Prospects
Phase One of the US-China trade deal has been reached and helped elevate Wall Street to new all-time highs. Under the terms of the agreement, China has pledged to increase imports of American goods and services by at least $200 billion over the next 2 years. For reference Chinese imports of US goods totaled $122.7 billion in 2019, which was considerably down from 2018 when imports exceeded $155 billion. This means that China would have to more than double their imports from the US over the next 2 years to meet these lofty goals, but early indications show that they are serious about holding up their end of the deal. The South China Morning Post and POLITICO reported the plan is as follows: $75 billion in manufactured goods, $50 billion of energy, and $40 billion in agricultural products, plus $35-40 billion in additional services.
Mastercard has this additional $35-40 billion in imported US services firmly in their crosshairs. Bloomberg values the Chinese payments market at more than $27 trillion yearly and with the Chinese now clearing once difficult hurdles, US card providers will have easier access to Chinese consumers than ever before. These prospects have payment giants like Mastercard salivating in delight. During President Trump’s announcement of the trade deal, he went as far to shout out Mastercard CEO, AJ Banga (among others) by name, suggesting the company should be able to greatly increase profits.
Blockchain Disruption
Blockchain technology is expected to drastically reduce transaction costs for retailers and many have warned that non-card payment processors will only take more and more market share away from traditional card processing companies. Mastercard has been proactive in making acquisitions in the account-to-account payment space, acquiring Nets for $3.2 billion and Vocalink for just under $1 billion. These dollar amounts are only a fraction of what Mastercard is capable of paying as the industry continues to consolidate.
Aside from making acquisitions in the space, Mastercard has been busy developing blockchain systems of their own. In October, the company was awarded a multiple-currency blockchain patent capable of supporting payments across multiple currencies. Their vision to implement a method of blockchain that enables different blocks capable of storing different types of information and security data was laid out in a recent press release from the CEO - “There is a need for a technological solution to provide a partitioned blockchain that is capable of storing multiple transaction formats and types in a single blockchain, reducing the computing resources and processing power required for deployment and operation of the blockchain, while also providing for enhanced usage of permissions for permissioned blockchains.”