Source: PaxForex Premium Analytics Portal, Fundamental Insight
Mastercard has certainly brought high returns to its investors. As the U.S. and the rest of the world gradually switched to cashless payments, it became a serious impetus for payment processing companies, including Mastercard. Only within the last ten years Mastercard shares have grown by more than 1400% and now have a market capitalization of over $300 billion. By the way, do you know that there are currently over 2.6 billion credit and debit cards issued by Mastercard?
However, growth may still have a long way to go. To get into an exclusive $1 trillion club, you need to more than triple Mastercard's market capitalization but, if the company continues to develop its business and cashless payment biases are maintained around the world, it can certainly do so.
According to the U.S. Census Bureau, e-commerce has increased from 4% of all retail sales to 11.5% in the last decade. And this trend is growing yet more actively in some essential worldwide markets.
Moreover, cashless payments have expedited lately. Businesses such as Square and other fintech companies have made payments by cards and other non-cash methods much more comfortable, while cash has become more inconvenient. COVID-19 may give some extra stimulus - cash is not the cleanest payment method.
Notwithstanding the growth of e-commerce and cashless payments in recent years, Mastercard could have much more space for growth.
It is particularly precise for international markets. Even though we usually consider credit cards to be the accepted form of payment in the United States of America, in many densely populated areas of the world this is simply not the case. In fact, Mastercard management concludes that about 80% of payment transactions worldwide are still made in cash.
Total card payments worldwide are expected to reach $45 trillion per year by 2023. Given that the four largest payment networks currently have about $17 trillion in annual payments (Mastercard's share is about 6 trillion), it is safe to say that there is much room for growth. It is not counting unpaid remittances, such as cross-border and person-to-person transfers, which are another significant area of growth.
Mastercard's main rival, Visa, has valued the global payments market at a staggering 185 trillion dollars. And while Visa is the market leader, Mastercard is not far behind, and both companies are likely to multiply their payments over the next few years.
While many doubt that Mastercard will reach $1 trillion next year or so, there is still a possibility that this will occur in the next decade. For Mastercard to boost its capitalization from $300 billion to $1 trillion in 10 years, it will have to make 12.7% annual growth, which truly sounds pretty conservative, given its recent history and favorable trends.