Porter’s Five Forces Analysis of Mastercard
Key Facts
| Name | Mastercard, Inc. |
| Industry | Consumer Credit Card and Related Services |
| Founded | 1966 |
| Headquarters | New York, United States |
| CEOs | Michael Miebach |
| Revenues | US$18.88 billion,2021 |
| Profit | US$8.33 billion, 2021 |
| Competitors | Visa, American Express, PayPal |
Company Overview
The company Mastercard, Inc. operates as a fintech. The business connects consumers, businesses and monetary institutions through the payments industry. It provides payment solutions for the growth and execution of credit, debit, prepaid, commercial, and payment programmes. The corporation was established in 1966, and Purchase, New York, USA serves as its corporate headquarters. Mastercard always continue to make collaborations to enhance its footprints, one of the biggest lodging franchisors in the world has reached an agreement with Wells Fargo and Mastercard for a number of years that will see the introduction of a new cobranded credit card programme this spring. Under the acclaimed Choice Privileges® reward programme, the new partnership will make Wells Fargo the official issuer and Mastercard the exclusive payments network for credit cards. With these organisations working together, Choice Privileges Mastercard cardholders will be able to take advantage of a variety of exciting new benefits and perks, as well as make it even simpler and quicker to earn points that can be exchanged for reward nights at more than 7,500 hotels across more than 20 different hotel brands, such as Cambria Hotels, Radisson Hotels, Radisson Blu, The Ascend Hotel Collection, Country Inn & Suites, Everhome, Comfort, and more. Mastercard is listed at 267 on Forbes’ Global 2000 ranking for 2022 list and 190 on the Fortune 500 list.
Porter’s Five Forces Analysis of Mastercard
Mastercard Rivalry among Existing Competitor
- Mastercard Inc: For the design and execution of credit, debit, prepaid and payment activities, it offers creative products. The business was established in 1966. Its sales increased sharply, growing at a compound annual growth rate of 13% from US$7.39 billion in 2012 to US$18.88 billion in 2021. Mastercard now accounts for the second-highest annual worldwide payment volume, up from US$1,470 billion in 2006 to US$4,743 billion in 2020. Mastercard’s credit card number of transaction volume increased from 51.52 billion in 2014 to 140 billion in 2021, so still leaving it behind in terms of both volume and value of transactions as compared to its competitor Visa.
- Visa Inc: The company Visa, Inc. provides services for online payments. It offers prepaid products, prepaid cards, international ATMs, debit cards, credit cards, and business payment solutions. The corporation was founded in 1958 and is headquartered in, USA..
If we analyze VISA, from US$10.42 billion in 2012 to US$24.57 billion in 2021, its revenue has climbed dramatically. In comparison to competitors, the compound annual growth rate is 10%, which is very nominal . Visa’s annual global payment volume climbed from US$2,190 billion to US$8,911 billion in 2020, making it the leader among competitors. Visa now processes 226 billion credit card transactions annually in numbers, up from 112.91 billion in 2014, making it the market leader in both volume and US$ amount.
- American Express Co: It offers charge and credit card goods, as well as travel-related services. The company’s head office are in New York, USA, and it was commenced on March 28, 1850. If we analyze American Express, From US$31.58 billion in 2012 to US$42.38 billion in 2021, its revenue increased. American Express now processes US$1,005 billion in annual global payments, up from US$571 billion in 2006. In 2014, American Express processed 6.64 billion credit card transactions in numbers; and that numbers still remains single digital in 2021.
- PayPal: PayPal Holdings, Inc. is a leading technological platform that enables digital payments and streamlines the shopping experience for retailers and customers throughout the world. PayPal is primarily used for two types of business: first, by merchants to run their operations, and second, by customers to access financial services and online buying resources. With a compound annual growth rate of 18%, its sales increased significantly from US$5.66 billion in 2012 to US$25.37 billion in 2021.
Mastercard Threat of New Entrants
- Market Size Growth: Fintech Market expansion might draw new players to the sector. With a total business value of US$9,471 billion in 2023, digital payments will be the largest division of the fintech trade. In the neobanking sector, it is anticipated that average transaction value per user will reach US$18,080 in 2023. Neobanking is anticipated to experience a revenue increase of 28.90% in 2024. In the digital payments sector, the estimated total transaction value in 2023 will be US$9,471 billion.
- Big players can the enter market by Acquisition: The payment platform Square’s acquisition of the Australian company Afterpay, valued at US$27.9 billion, was the largest fintech deal in the first half of 2022. This was significantly bigger than the biggest fintech deal in 2020, when TD Ameritrade, a US-based company, topped the list of biggest fintech investment deals with an M&A valued at over US$22 billion. Existing Trandition Financial players may enter the market by adopting acquistion strategy.
Mastercard Bargaining Power of Suppliers
- Major players in the market: Mastercard has significant market share and therefore significant negotiating leverage with suppliers. Visa, which accounts for 52.8% of all credit cards in use, is by far the most prevalent of the four major credit card types: Mastercard, American Express, Discover, and Visa. That puts Discover and American Express in the single digits and much surpasses Mastercard, which accounts for 31.6% of cards. But because they dominate the market, they enjoy a significant competitive advantage.
Mastercard Bargaining Power of Buyers
- Customer base: Visa, which accounts for 52.8% of all credit cards in use and Mastercard 31.6% share makes them biggest two players. This will lessen the negotiating strength of Visa and Mastercard customers.
- Access multiple benefits: According to a survey, the average person has three distinct credit card accounts. Users will apply for a new card if it offers more rewards and benefits and increases their bargaining power. Given that people can apply for new accounts throughout their lives, this number varies somewhat by generation and tends to rise for older generations.
Mastercard Threat of Substitute Products or Services
- Number of fintech startups worldwide: Fintech refers to the use of technological solutions in the financial services sector, such as payments and mobile wallets. These solutions are typically created by young businesses and provided to more established ones. In just three years, from 2018 to 2021, the number of fintech startups increased in the USA from 5,686 to 10,755, in the EMEA region (Europe, the Middle East, and Africa) from 3,581 to 9,323, and in the Asia Pacific region from 2,864 to 6,268. In the upcoming years, the rate of growth in the number of startups may increase the likelihood of substitute products for existing players.
.
- Global Fintech Market Growth: In 2018, the global fintech industry generated €92 billion in revenue. The sector’s revenue is anticipated to increase by an average of around 12% over the ensuing years, reaching a total of €188 billion by 2024. This can provide greater opportunity to grow for startup as well as for existing players.
References
- Mastercard, Profile, Forbes
- Mastercard, Profile, ForbesGlobal2000
- Mastercard, Profile, Fortune500
- PayPal Holdings, profile Forbes
- Visa Inc, profile Forbes
- PayPal Holdings, profile Fortune500
- Mastercard Revenue 2010-2022 | MA at MacroTrends
- Number of fintech startups worldwide from 2018 to 2021, by region at Statista
- Intech financial technlology sector revenue worldwide in 2017 and 2018, with a forecast until 2024(in billion euros) at Statista
- Largest fintech deals worldwide from 2020 to H1 2022(in billion U.S. dollars) at Statista
- 9 Interesting Credit Card Statistics at Forbes
- Number of purchase transactions on global general purpose card brands American Express, Diners/Discover, JCB, Mastercard, UnionPay and Visa from 2014 to 2021(in billions) at Statista
- Finance & Insurance›Financial Service|Credit cards worldwide- statistics & facts at Statista
- Number of Mastercard credit cards in the United States and worldwide from the 2nd quarter of 2019 to 4th quarter of 2021(in millions) at Statista
- American Express Annual report 2021
- American Express Annual report 2012
- American Express, profile, Forbes
- American Express Revenue 2010-2022 | AXP at MacroTrends
- FinTech – Worldwide at Statista
- Digital Payments report 2021 at statista
- Digital Payments – Worldwide at statista
- Market share of online payment processing software technologies worldwide as of September 2022 at Statista
- Annual reports 2016 to 2021 Paypal
- Annual Reports Visa
- Visa Revenue 2010-2022 | MacroTrends
- PayPal Holdings Revenue 2013-2022 | PYPL at MacroTrends
- PayPal Holdings Total Assets 2013-2022 | PYPL at MacroTrends
- Visa Total Assets 2010-2022 | at MacroTrends
- Number of purchase transactions on global general purpose card brands American Express, Diners/Discover, JCB, Mastercard, UnionPay and Visa from 2014 to 2021(in billions) at Statista
- Choice Hotels, Wells Fargo, and Mastercard to Launch New Cobranded Credit Card at Wall Street Journal WSJ