In terms of means to pay, I prefer to see cash. That’s just me though. Fortunately the world progresses at a faster pace than my preferences, and hence the popularity of credit cards. In a digital world, we need to be able to pay for things quickly, efficiently and securely. But what if those conditions aren’t met? Where would we be if our credit cards were processed at the speed of molasses or if our payments ended up in the wrong database so we would never recieve our goods, but have evidence of payment?

We would be in a world of hurt to say the least.

“So blessed are the men and women who work tirelessly behind the scenes so that when we swipe our credit or debit cards, they work…flawlessly” – Book of Tasia 12:12

As magical as our credit cards may be, understanding the invisible operations of the credit card industry is very important and I plan to write a post on exactly what goes down when you swipe a card. But until then, I want to talk about one of the largest companies  dedicated to making your payment processing seamless, MasterCard.

Company Snapshot (Yahoo! Finance Data)
Name:  MasterCard (as of close of business 1/28/2016)
Ticker: MA
Current Price: $83.43
52 Week High Price:$101.76
52 Week Low Price: $74.61
Market Capitalization: $94.39B (Large Capital)
Price/Earnings (P/E Ratio): 25.62
Earnings/Share (EPS): $3.26
Dividend: $0.76/year (0.90% yield)
Industry: IT Services
Primary Business: Global Payments

 The Good

With earnings coming out tomorrow, MasterCard will be in the spotlight from its investors who are looking to see positive growth. I’m personally pretty surprised with the most recent announcement of an increased dividend, (due to hit shareholders’ pockets, like myself, on February 6th) considering their recent big push for new products and services.

*Queue Cash Flow Analysis*

In the 2014 cash flow statements two things stuck out to me. One was that MasterCard’s cash from investments  ended in a surplus  versus deficit which it had been settling at in 2011 – 2013. In this case the money spent in capital expenditures and acquisitions of business was off set by the sale/maturity of investments. So like you and I have to make good investments with our money, MasterCard does too. Seems like their investments are paying off for them.

MasterCard has become a front runner in the global payments industry by supporting Apple Pay, Samsung Pay and Android Pay platforms so that your money is available to you even if you don’t have your wallet with you. In addition to new product offerings taking off, MasterCard was ranked #6 on the Fortune Blue Ribbon Companies article written back in December. That’s because they have continuously put technology first in their business to present the entire world as a platform for commerce for each person using their services.

The Bad

As you may suspect, competition in payment processing world is a bit steep. MasterCard competes with Visa, Discover, American Express, Synchrony and many others that are battling for market share. Visa is in the best position to be the closest competition. Visa is quickly making technological advances and making their data available to marketing firms which is generating significant revenue for them. Visa has the highest market capitalization of any other competitor and has positive cash flows on an annual basis as well.

The Ugly

If you carry a balance on your credit card, you might have seen the interest rate you pay increase. Often times credit cards offer a variable interest rate that depend on the national prime rate. The prime rate is the minimum interest rate in which money can be borrowed by one party from another. This slight increase in interest rate on your credit card is a result of the US Federal Reserve deciding to raise the national prime interest rate. So if you didn’t already have enough motivation to pay off that debt quickly, you should have motivation now, because rates may gradually continue to get higher through 2016.

There’s so much to say about MasterCard, but I’ll leave it here.

Til next time folks…