As the two largest credit card network operators, Visa (NYSE: V) and Mastercard (NYSE: MA) dominate the global payments industry.
Yet with their stocks up 740% and 660%, respectively, over the past decade, you could be excused for thinking their days of turbocharged growth are behind them.
You could also be quite wrong to think that.
Here are three reasons to believe that tremendous gains still lie ahead for these payments titans.
Image source: Getty Images.
1. The staggering possibilities of e-commerce
Even after two decades of torrid growth, the rise of e-commerce is still in its early innings. Online sales comprise only about 10% of the global retail total, and research firm eMarketer estimates that retail e-commerce sales will increase from $2.3 trillion in 2017 to nearly $4.5 trillion in 2021. With hundreds of millions of new people gaining access to the internet every year, e-commerce appears set to keep growing at a rapid pace for at least another decade, and likely much longer.
Why is the growth of e-commerce beneficial to Visa and Mastercard? The answer is simple: Online sales are far more likely to be completed via digital payment methods than in-store transactions. In fact, Visa CFO Vasant Prabhu recently said that for online purchases, "the propensity to use a Visa card is twice as high as a face-to-face transaction." So as retail sales continue to trend online, Visa and Mastercard stand to profit handsomely.
2. Massive -- and largely untapped -- market opportunities
Another area where these companies are expanding is in the business-to-business payments arena. This is a $124 trillion market, according to Mastercard CFO Martina Hund-Mejean, and one in which more than 80% of the transactions are currently completed via ACH, check, or cash.
Both recently announced new B2B platforms, which they believe will allow them to capture a larger share of this immense opportunity. Mastercard's B2B Hub offers small and midsized businesses automation tools for digital invoice processing and accounts payable management that "improve the speed, ease, and security" of their commercial payments. Meanwhile, Visa's B2B offering, the Visa Ready Program for Business Solutions, helps companies quickly integrate an array of Visa B2B payments solutions, including "enhanced data, virtual card integration, payables automation, and payment controls."
By offering tools to small businesses that were previously only available to larger enterprises, Mastercard and Visa should be able to rapidly advance their beachhead in B2B payments.