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Are Visa and MasterCard Being Threatened by Silicon Valley?

The impenetrable moat around Visa (NYSE: V  ) and MasterCard (NYSE: MA  ) in the payments business may not be so impenetrable for long. In this segment from Where the Money Is, Motley Fool financial analysts Matt Koppenheffer and Patrick Morris broadcast from the Transact 2014 conference in Las Vegas, to discuss the broader payments industry, and how the lines of competition are getting blurred. While the massive payments networks of Visa and MasterCard have traditionally allowed them to maintain high margins and ward off competitors, new payments business models coming from the giants of tech like Google (NASDAQ: GOOGL  ) , (NASDAQ: AMZN  ) and eBay (NASDAQ: EBAY  ) with its PayPal business could soon spell a changing dynamic for the big dogs in this industry.

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  • Report this Comment On April 20, 2014, at 5:52 PM, PhilipCohen wrote:

    “How Discover and American Express Plan to Takedown Visa and MasterCard”, and

    “Are Visa and MasterCard Being Threatened by Silicon Valley?”

    Oh, please, Motley Fool, stop publishing such arrantly nonsensical stories! Who is paying you to publish this nonsense, eBay’s Johnny Ho?

    Regardless, without exception (except for Amex and Discover), all the “middlemen” payments processors do little or no more than operate Credit Card Merchant Accounts with their own retail bankers and ride, somewhat precariously, on the backs of MasterCard and/or Visa, or the banks’ relatively primitive ACH direct debiting process; none of these “pretenders” are or ever will ever be of any serious threat to the “bankcards”, MasterCard and Visa; not even the other small independent “bankcard”, Discover, can possible compete with the systems of the two major players. And what about Amex? Well, they did consign Diners Club (now owned by Discover) to the scrap heap of history, but most merchants are never going to accept Amex’s higher discount fee, and Amex simply does not have anywhere near the number card-carrying users that of the two majors have …

    As of 2012, of the total global payments market (volume), Visa has ~52%, MasterCard ~33% and Amex ~11% (total ~96%); that leaves ~4% for the rest: Discover has ~1.6%, JCB (Japan) ~2.2%, and Diners Club (owned by Discover) ~0.4%; that leaves ~0.0% for payments handled directly by all the others. Why do these middlemen not make even a blip in these statistics? Because most of their processing is done on the backs of MasterCard or Visa or, as in the case of eBay’s clunky “PreyPal”, some via ACH direct debits—if any of its users are silly enough to give “PreyPal” such authority.

    So, how about some stories on this matter that make some sense, like the probable demise of eBay’s “PreyPal” (outside of its effectively mandated place on the eBay marketplace) now that the two major bankcards have launched their own mobile/online digital wallets …

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