MasterCard (MA) isn’t a sexy name or in a sexy business. But it’s at the epicenter of a macro trend that is tough to ignore: the decline of paper money and the increasing dominance of e-commerce that relies on electronic banking.
MasterCard is a glorified toll-taker in the business world, exacting a small fee for hooking up merchants with customers’ payment options. MA is just a payment processor and not a financial stock, since it doesn’t actually issue cards or hold consumer debt.
But this is a good thing because it allows you to get access to the growing credit card and e-commerce scene by directly playing per-swipe transactions. The decline of paper money usage and a mild economic tailwind that is increasing transaction volume is lifting MasterCard stock, with market-beating gains of 21% year-to-date in 2013 and roughly 280% gains since the March 2009 lows.
And it’s not just the U.S. fueling growth — it’s emerging markets in Latin America and Asia, where reliance on bank accounts and debit cards are on the rise.
MasterCard reports earnings July 31. After a strong performance last quarter with a 12% profit increase that beat expectations, we could see another move higher for MA on similar results.