Mastercard Inc (MA): Is Visa Inc (V) Winning the Battle?

During the recent Investor Day conference hosted by Visa Inc (NYSE:V) , the company’s management shed some light on its emerging and developed market strategies. Also, some time was dedicated to its upcoming mobile and innovative strategies. Management once again demonstrated its resolve on building stronger relationships with its customers to help drive sales volume. Therefore, I am bullish on the stock.

Growing the pie

Visa Inc (NYSE:V) is already considered to be the market leader in the global payments industry, but that’s not enough for its management. To further grow its market share, management is coming up with significant investment plans which include products and strategies including loyalty programs and security solutions. Visa also indicated that is willing to provide higher partner incentives to increase volumes.

Developed market strategy

The developed markets still present tremendous growth potential for Visa Inc (NYSE:V). While the personal consumption expenditure (PCE) pie is itself growing, Visa also has the opportunities in the government expenditures and commercial expenditure markets.

Within the developed markets, cross-border transactions remain the highest yielding in terms of revenue, due to the conversation fees and because all transactions run over the Visa network. In contrast, domestic transactions tend to bring down yield.

Emerging markets

The emerging markets are marked with higher rates of cash and check transactions, leaving room for Visa Inc (NYSE:V) to convert these into electronic payments. However, within these markets, debit is growing faster than credit, mostly due to strict credit regulations. Therefore, fast growing debit in the emerging markets presents the company with an excellent growth opportunity.

Winning the innovation battle

Visa Inc (NYSE:V) is the pioneer in innovation of the payment solutions. Currently, its mobile wallet, which went live in November 2012, is in the early stages of development and I believe this will materially grow the company’s market share. The product’s ease of use, strength of network, and distribution will appeal to customers in the coming future.

Besides creating innovating payment solutions, Visa Inc (NYSE:V) is busy personalizing data of its customers to increase sales and manage frauds. This will enable Visa to provide tailored offers to customers through analytics of enormous amounts of transaction data.

Financials

Given the strong revenue trajectory due to the aforementioned strategies, Visa Inc (NYSE:V) is expected to report a low double-digit revenue growth for the fiscal year 2014. According to the company’s early guidance, the company is expected to generate EPS growth in the late teens.

The company’s May U.S. payment volume growth of 12% was flat compared to the April volume. To further grow its revenue, the company announced that client incentives will continue to grow both as an absolute dollar amount and as a percentage of gross revenue.