In yesterday's earnings announcement, MasterCard (NYSE: MA) beat analyst earnings estimates but missed (barely) on revenue expectations. The company's profits were up 31% to $3.49 a share in the second quarter with revenue coming in at $1.37B. Analysts expected Q2 earnings per share of $3.33 and revenue of $1.38B.

Of greater significance to many analysts is that MasterCard reported the number of processed transactions was essentially flat, rising 0.1%. MasterCard investors are closely watching consumer spending numbers, and flat transaction volume isn't a good sign. However, if you normalize transaction growth based on the loss of a series of debit portfolios earlier this year, then transaction growth increased about 10%. By comparison, Visa (NYSE: V) reported a 14% increase in transactions in its earnings announcement last week.

Consumer spending worries aren't the only concern for MasterCard and Visa. Investors in both companies are also focusing on the future impact of the Dodd-Frank financial regulatory reform legislation and the possibility that limits may be placed on the fees that MasterCard and Visa impose on merchants when processing debit card transactions. The payment processors have an advantage over banks in that they are insulated from any consumer credit card defaults, although rising delinquency rates as part of a consumer credit crisis would bring down transaction volumes. In the short term, the risk of credit card delinquency seems low, with late payments falling to their lowest rates since 2002. Credit card delinquencies fell to 3.88% from 4.39% from the fourth quarter of 2009 as consumers are saving more and paying down debt. But the more immediate concern for processors like MasterCard and Visa is that their debit card interchange fee revenue could decrease materially because of the financial reform legislation.

Perhaps an even larger concern for future earnings, or an even greater growth opportunity (depending on your perspective), is the potential for mobile payments to dominate the electronic payments industry. In short, in the future you may want to throw away your plastic and start using your smartphone to transact. Verizon (NYSE: VZ), AT&T (NYSE: T), and T-Mobile are working with Discover Financial Services (NYSE: DFS) and Barclays to support using your mobile phone to pay at checkout scanners. Online, the mobile carriers are working with upstarts such as Zong or Boku to make online purchasing as simple as typing in your cell phone number and receiving a dynamic PIN on your cell phone to complete the transaction. And last month, Google quietly announced that it would support a mobile carrier payment solution on its Android marketplace -- potentially cutting out PayPal, MasterCard, Visa, and other payment providers altogether. In response to these threats, MasterCard CEO Ajay Banga emphasized on the earnings call that the company has more than 20 pilot and commercial programs in the U.K., Canada, U.S., and Japan to roll out mobile payment technology.

At market close today, MasterCard shares are down almost 1%. Notwithstanding the consumer spending, regulatory, and mobile payments concerns, is now a good buying opportunity for MasterCard? For what it's worth, Goldman Sachs recently removed MasterCard from its conviction buy list, although it is still keeping a buy rating on the company. Goldman added Visa to the conviction list because of its faster-growing debit business.

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