Why MasterCard is Underperforming Visa Today

A court ruled today that bank fees may not have to be lowered as the market expected, which should be good for both Visa and MasterCard.

Mar 21, 2014 at 3:30PM

Stock markets were mixed today with little economic or earnings news to drive trading. The one notable news item in the last 24 hours was the Federal Reserve "stress test" finding that 29 of the 30 largest U.S. banks would be able to continue lending in a severe recession. The only bank to fail was Salt Lake-City based Zions Bancorporation.

As of 3:30 p.m. EDT the Dow Jones Industrial Average (DJINDICES:^DJI) was up 0.11%, while the S&P 500 and Nasdaq Composite were both down for the day.

Visa leads the Dow
Credit card payment processor Visa (NYSE:V) was up 0.75% today. Interestingly, competitor Mastercard (NYSE:MA) was down 2.9% on the day.

Visa Image Tmf

Visa cards could become more common if swipe fees are raised. Image owned by The Motley Fool.

A federal appeals court ruled today that the Fed was reasonable in setting debit card swipe fees, reversing a ruling last year that may have resulted in fees lower than the current $0.21 per swipe cap. What the ruling didn't do is end the court battle between retailers and banks that charge the swipe fees. The court said the law was written poorly and more clarification is needed to determine the appropriate cap.  

A pending appeal from retailers could go as high as the Supreme Court. For now, fees will stay where they are, which relieves some pressure Visa and MasterCard may have felt if the cap was lowered.

Why MasterCard is underperforming Visa today
You might think VIsa and MasterCard would rise together because both companies would benefit from higher swipe fees. But Visa would actually benefit more from the fees due to its higher market share in debit cards. If banks were forced to raise fees for consumers having debit cards, this could have meant a shift toward credit cards, where MasterCard holds a higher market share, or other payment methods.

That's why MasterCard isn't seeing the Visa's pop today. Whether the ruling will actually have a positive effect on Visa or a negative effect on MasterCard is yet to be answered. Remember that the court battle isn't over. For today, though, the market sees Visa as the big winner.

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Travis Hoium manages an account that owns shares of MasterCard and Visa. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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