Stablecoins Pose Structural Threat to Visa and Mastercard, Warns Bill Gurley
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 6 days ago
0mins
Source: seekingalpha
- Threat from Stablecoins: Bill Gurley warns that stablecoins could pose a structural threat to Visa and Mastercard, indicating that traditional payment giants face disruptive challenges rather than just margin pressures.
- Transaction Fee Issues: Gurley highlights that modern technology can facilitate instant transfers at minimal costs, yet U.S. consumers still incur 2%-2.5% credit card transaction fees, reflecting inefficiencies in the payment system.
- Regulatory Capture: He argues that banks' interests in Visa and Mastercard have hindered the adoption of alternatives like FedNow, turning payment fees into a result of regulatory capture rather than economic necessity.
- Market Potential: Gurley believes stablecoins like USD Coin (USDC) can transfer funds in seconds for pennies while offering around 4% yield, potentially causing significant disruption to traditional payment networks.
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Analyst Views on MA
Wall Street analysts forecast MA stock price to rise
28 Analyst Rating
25 Buy
3 Hold
0 Sell
Strong Buy
Current: 492.990
Low
500.00
Averages
660.00
High
739.00
Current: 492.990
Low
500.00
Averages
660.00
High
739.00
About MA
Mastercard Incorporated is a technology company in the global payments industry. The Company connects consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide by enabling electronic payments and making those payment transactions secure and accessible. It provides a range of payment solutions and services using its brands, including Mastercard, Maestro and Cirrus. It operates a payments network that provides choice and flexibility for consumers, merchants and its customers. Through its proprietary global payments network, it switches (authorizes, clears and settles) payment transactions. Its additional payments capabilities include automated clearing house (ACH) transactions (both batch and real-time account-based payments). It offers security solutions, consumer acquisition and engagement, business and market insights, gateway, processing and open banking, among other services and solutions.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Overview of This Week's Dividend Activities
- Dividend Increases: HEICO announced an increase in its dividend from $0.12 to $0.13 per share, representing an 8.3% rise, indicating ongoing profitability and boosting investor confidence.
- New Dividend Declarations: Mastercard (MA) declared a dividend of $0.87 per share, HP at $0.30, and Dell (DELL) at $0.63, reflecting these companies' commitment to stable cash flow and shareholder returns.
- Upcoming Dividends: Broadcom (AVGO) and FedEx (FDX) have ex-dividend dates set for June 22, with payout dates on June 30 and July 7 respectively, highlighting continued market interest and investor anticipation for these firms.
- ETF Investment Opportunities: Investors can explore various dividend-focused ETFs such as VIG and SCHD, which provide diversified options for those seeking stable income, thereby broadening the revenue sources of their investment portfolios.
See More
Analysis of Visa and Mastercard's Profit Models
- Strong Profitability: Over the past five years, Visa's average quarterly net income margin reached 51.2%, while Mastercard's was slightly lower at 45.4%, demonstrating both companies' robust earnings generation capabilities that further solidify their market dominance.
- Cost Advantage in Transactions: The operational model of Visa and Mastercard allows for virtually zero marginal cost per transaction, with Visa achieving an operating margin of 64.4% in Q2 of fiscal 2026 and Mastercard at 58.4%, indicating high profit margins under fixed cost coverage.
- Abundant Free Cash Flow: Combined, the two companies generated $5.2 billion in free cash flow during Q1 2023, enabling substantial returns to shareholders through dividends and stock buybacks, which enhances investor confidence.
- Beneficiaries of Economic Growth: Visa and Mastercard benefit from economic growth and the trend towards cashless transactions, particularly in emerging markets where digital payment penetration has significant room for improvement, expected to drive future revenue growth.
See More
Analysis of Visa and Mastercard's Profit Models
- Strong Profitability: Visa and Mastercard reported quarterly net income margins of 51.2% and 45.4%, respectively, indicating robust profitability in payment processing, with expectations for continued double-digit earnings growth that will further solidify their market leadership.
- Excellent Cash Flow: The two companies generated a combined $5.2 billion in free cash flow in Q1 2023, enabling substantial returns to shareholders through dividends and stock buybacks, which enhances investor confidence and increases shareholder value.
- Significant Market Penetration Potential: While 83% of U.S. consumers used cash at least once in the past 30 days, there remains considerable room for digital payment penetration in emerging markets, providing Visa and Mastercard with ongoing growth opportunities as cash transactions decline.
- Inflation Resilience: In an environment of rising inflation, both Visa and Mastercard reported over 20% year-over-year revenue growth in late 2021 and early 2022, demonstrating their resilience during economic fluctuations and positioning them to benefit from economic growth and increased consumer spending.
See More
Investment Choices in Digital Payments Sector
- Mastercard's Market Position: Operating in over 200 countries, Mastercard processed transactions generating nearly $32.8 billion in revenue for FY 2025, reflecting a growth rate of approximately 16.4% and a net income of around $15 billion, underscoring its strong profitability and leadership in the digital payments sector.
- Remitly's Growth Potential: Focusing on the international remittance market, Remitly achieved approximately $1.6 billion in revenue for FY 2025, marking a 29.4% increase and a first-time net income of about $67.9 million, with a net margin of 4.2%, indicating its competitive edge in the rapidly expanding digital remittance space.
- Regulatory and Risk Challenges: Both companies face regulatory pressures, including potential caps on interchange fees and data localization mandates, with Mastercard's robust network effect providing relative safety in competition, while Remitly relies on global money transfer licenses and must navigate complex anti-money laundering laws.
- Valuation Comparison: Mastercard's price-to-sales ratio stands at 13.5x, while Remitly's forward P/E is at 31.8x, highlighting significant differences in market valuations, prompting investors to consider their risk tolerance and return expectations when making investment decisions.
See More
Underrated Dividend Stocks with Low Yields
- Microsoft Dividend Growth: Microsoft offers a 0.9% dividend yield, lower than the S&P 500's 1.1%, yet its dividend has surged by 153% over the past decade to $0.91 per share quarterly, indicating strong growth potential and room for future increases.
- Eli Lilly's Appeal: Eli Lilly's dividend yield stands at 0.6%, but its quarterly payout has more than doubled from $0.85 in 2021 to $1.73, reflecting a five-year growth trajectory, while its low payout ratio of 22% suggests sustainable future dividend increases.
- Mastercard's Solid Performance: Mastercard's dividend yield is 0.7%, but its quarterly dividend has risen from $0.19 a decade ago to $0.87, marking a 358% increase, showcasing robust business fundamentals and optimism for continued growth.
- Investment Value Analysis: Despite lower yields, Microsoft, Eli Lilly, and Mastercard's strong growth and low payout ratios position them as reliable long-term investments, providing investors with stable income streams.
See More
Low Yield, High Growth Dividend Stocks
- Microsoft Dividend Growth: Microsoft's quarterly dividend has increased from $0.36 a decade ago to $0.91 today, a 153% rise with a compounded annual growth rate (CAGR) of nearly 10%, and despite its 0.9% yield being below the S&P 500's 1.1%, its low payout ratio of 21% indicates significant room for future growth.
- Eli Lilly's Appeal: Eli Lilly's quarterly dividend has more than doubled in five years from $0.85 in 2021 to $1.73, and while its current yield is only 0.6%, its payout ratio of 22% suggests the company can continue to increase dividends while providing exposure to the fast-growing GLP-1 market.
- Mastercard's Solid Performance: Mastercard's quarterly dividend has surged from $0.19 a decade ago to $0.87, representing a 358% increase and a CAGR of over 16%, and although its yield is 0.7%, its low payout ratio of 18% and 47% sales growth indicate a strong business foundation and future growth potential.
- Investor Considerations: While these companies currently offer low dividend yields, their strong growth prospects and low payout ratios make them reliable income investment choices, and investors should focus on their long-term dividend growth potential.
See More
Overview of This Week's Dividend Activities
- Dividend Increases: HEICO announced an increase in its dividend from $0.12 to $0.13 per share, representing an 8.3% rise, indicating ongoing profitability and boosting investor confidence.
- New Dividend Declarations: Mastercard (MA) declared a dividend of $0.87 per share, HP at $0.30, and Dell (DELL) at $0.63, reflecting these companies' commitment to stable cash flow and shareholder returns.
- Upcoming Dividends: Broadcom (AVGO) and FedEx (FDX) have ex-dividend dates set for June 22, with payout dates on June 30 and July 7 respectively, highlighting continued market interest and investor anticipation for these firms.
- ETF Investment Opportunities: Investors can explore various dividend-focused ETFs such as VIG and SCHD, which provide diversified options for those seeking stable income, thereby broadening the revenue sources of their investment portfolios.
See More
Analysis of Visa and Mastercard's Profit Models
- Strong Profitability: Over the past five years, Visa's average quarterly net income margin reached 51.2%, while Mastercard's was slightly lower at 45.4%, demonstrating both companies' robust earnings generation capabilities that further solidify their market dominance.
- Cost Advantage in Transactions: The operational model of Visa and Mastercard allows for virtually zero marginal cost per transaction, with Visa achieving an operating margin of 64.4% in Q2 of fiscal 2026 and Mastercard at 58.4%, indicating high profit margins under fixed cost coverage.
- Abundant Free Cash Flow: Combined, the two companies generated $5.2 billion in free cash flow during Q1 2023, enabling substantial returns to shareholders through dividends and stock buybacks, which enhances investor confidence.
- Beneficiaries of Economic Growth: Visa and Mastercard benefit from economic growth and the trend towards cashless transactions, particularly in emerging markets where digital payment penetration has significant room for improvement, expected to drive future revenue growth.
See More
Analysis of Visa and Mastercard's Profit Models
- Strong Profitability: Visa and Mastercard reported quarterly net income margins of 51.2% and 45.4%, respectively, indicating robust profitability in payment processing, with expectations for continued double-digit earnings growth that will further solidify their market leadership.
- Excellent Cash Flow: The two companies generated a combined $5.2 billion in free cash flow in Q1 2023, enabling substantial returns to shareholders through dividends and stock buybacks, which enhances investor confidence and increases shareholder value.
- Significant Market Penetration Potential: While 83% of U.S. consumers used cash at least once in the past 30 days, there remains considerable room for digital payment penetration in emerging markets, providing Visa and Mastercard with ongoing growth opportunities as cash transactions decline.
- Inflation Resilience: In an environment of rising inflation, both Visa and Mastercard reported over 20% year-over-year revenue growth in late 2021 and early 2022, demonstrating their resilience during economic fluctuations and positioning them to benefit from economic growth and increased consumer spending.
See More
Investment Choices in Digital Payments Sector
- Mastercard's Market Position: Operating in over 200 countries, Mastercard processed transactions generating nearly $32.8 billion in revenue for FY 2025, reflecting a growth rate of approximately 16.4% and a net income of around $15 billion, underscoring its strong profitability and leadership in the digital payments sector.
- Remitly's Growth Potential: Focusing on the international remittance market, Remitly achieved approximately $1.6 billion in revenue for FY 2025, marking a 29.4% increase and a first-time net income of about $67.9 million, with a net margin of 4.2%, indicating its competitive edge in the rapidly expanding digital remittance space.
- Regulatory and Risk Challenges: Both companies face regulatory pressures, including potential caps on interchange fees and data localization mandates, with Mastercard's robust network effect providing relative safety in competition, while Remitly relies on global money transfer licenses and must navigate complex anti-money laundering laws.
- Valuation Comparison: Mastercard's price-to-sales ratio stands at 13.5x, while Remitly's forward P/E is at 31.8x, highlighting significant differences in market valuations, prompting investors to consider their risk tolerance and return expectations when making investment decisions.
See More
Underrated Dividend Stocks with Low Yields
- Microsoft Dividend Growth: Microsoft offers a 0.9% dividend yield, lower than the S&P 500's 1.1%, yet its dividend has surged by 153% over the past decade to $0.91 per share quarterly, indicating strong growth potential and room for future increases.
- Eli Lilly's Appeal: Eli Lilly's dividend yield stands at 0.6%, but its quarterly payout has more than doubled from $0.85 in 2021 to $1.73, reflecting a five-year growth trajectory, while its low payout ratio of 22% suggests sustainable future dividend increases.
- Mastercard's Solid Performance: Mastercard's dividend yield is 0.7%, but its quarterly dividend has risen from $0.19 a decade ago to $0.87, marking a 358% increase, showcasing robust business fundamentals and optimism for continued growth.
- Investment Value Analysis: Despite lower yields, Microsoft, Eli Lilly, and Mastercard's strong growth and low payout ratios position them as reliable long-term investments, providing investors with stable income streams.
See More
Low Yield, High Growth Dividend Stocks
- Microsoft Dividend Growth: Microsoft's quarterly dividend has increased from $0.36 a decade ago to $0.91 today, a 153% rise with a compounded annual growth rate (CAGR) of nearly 10%, and despite its 0.9% yield being below the S&P 500's 1.1%, its low payout ratio of 21% indicates significant room for future growth.
- Eli Lilly's Appeal: Eli Lilly's quarterly dividend has more than doubled in five years from $0.85 in 2021 to $1.73, and while its current yield is only 0.6%, its payout ratio of 22% suggests the company can continue to increase dividends while providing exposure to the fast-growing GLP-1 market.
- Mastercard's Solid Performance: Mastercard's quarterly dividend has surged from $0.19 a decade ago to $0.87, representing a 358% increase and a CAGR of over 16%, and although its yield is 0.7%, its low payout ratio of 18% and 47% sales growth indicate a strong business foundation and future growth potential.
- Investor Considerations: While these companies currently offer low dividend yields, their strong growth prospects and low payout ratios make them reliable income investment choices, and investors should focus on their long-term dividend growth potential.
See More
