Since their initial public offerings (IPO) both Visa and MasterCard have been on a rocket trajectory. If you have ever taken a close look at their financial statements you will understand why it has been warranted. After you read the infographic below you will see where their massive profits come from. Unfortunately their rising transaction fees are squeezing merchant’s margins to record low levels. With little competition there doesn’t appear to be any relief on the horizon. Credit card companies and payment processors like PayPal will continue to have true pricing power.
It is often said that if you can’t beat ’em, join ’em. Luckily investors can do just that. If you can stomach the high valuations of Visa (V), MasterCard (MA), PayPal/Ebay (EBAY) common stock, you too can benefit from their runaway fees.