Today’s Most Exciting Fintech Innovators
These two big payment players continue to dominate the market. One strategy for a company to create growth is to improve its existing technology by extending product features, which Visa and Mastercard have a long history of doing. At the same time, there are many new entrants in the market, such as Apple Pay and Google Wallet.
The only strategy here was for Visa and Mastercard to bypass their own plastic cards, which they did. Both companies realized that a product’s best feature would never be invented in-house. They constantly warp themselves, vying to become the standard for the entire paying sector. Even when plastic cards disappear completely, Visa and Mastercard will still be ubiquitous because they keep innovating.
Plenty of Growth Potential Left
The outlook for both payment companies looks bright. Economy and consumer spending just have to hold up. There are still large markets to conquer, but Visa and Mastercard will be competing with many others in the market. Profit forecasts will be revised down if current coronavirus fears see a significant reduction in economic activity. Before this was considered, Wall Street analysts were bullish on revenue prospects for both companies.
Current events may see investors rethinking how much they’re willing to pay for services like Visa and Mastercard. People who are thinking long term will hopefully realize both companies will be more valuable in 10 or 20 years than they are today.
Who Dominates the European Card Market?
Mastercard and Visa are now accountable for over 86% of all of Europe’s payment cards, according to Retail Banking Research (RBR) — the highest in any region. Competition between the two is still fierce, but Visa is the larger scheme for payment value and gained a percentage point value, while Mastercard lost one. Visa accounts for 54% of expenditure and has a higher number of debit cards in Europe, which are typically used more.
RBR believes other schemes will no longer be able to compete, and portfolio gains will now be based on factors such as service levels and scheme fees - competition will be intense as ever.
Is PayPal a Friend or a Foe?
Coming to buying and selling online, Paypal is often described as being the best for online services, and so Visa and Mastercard face incredible competition. There is sensibility in believing that both the significant players have surrendered force on the web to PayPal.
PayPal has struck a chord with businesses for many reasons, like how easy it is to transfer. In many ways, Mastercard and Visa are trying to play catch-up with PayPal, with things like digital wallets. PayPal is still small, but it is fast growing.
A few years prior, there was trouble surrounding PayPal due to its encouragement of customers to link their accounts to their bank accounts rather than a credit or debit card. While a solution is now in place, it shows a degree of vulnerability to a dominant market position.
Mastercard Joins ID2020 Alliance
Mastercard announced on the 21st May 2020 that it would be joining the ID2020 Alliance, a global multi-stakeholder partnership dedicated to enabling everyone to have access to a viable and trusted form of legal identity. Ajay Bhalla, president of Cyber and Intelligence at Mastercard, says that they share the belief that “digital identity is a fundamental human right.”
The collaboration builds on Mastercard’s commitment to improving how people can use their digital identity in an increasingly connected world. This move could be a useful way to bring Mastercard into other foreign markets with a good reputation for great business.
So while there have been a lot of challenges coming at Mastercard and Visa, they prove time and time again that they can step up to the challenge.
About the Author
Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.