As mentioned in my U.S. non-banking financial services update, Visa was next on the list of companies we’ll deep dive into the space, after FactSet and Farmer Mac. In December, I initiated an investment position in Visa, and as you can imagine, there’s no studying Visa without researching both Mastercard and American Express.
Last week, Mastercard’s valuation unexpectedly fell below the price we’d want to pay for its shares, after the Trump administration announced a 10% interest rate cap on credit cards. For transparency, earlier this morning, I initiated a position in Mastercard, and both companies now constitute a combined 11% weighting of the Jenga Fund.
While it might be easier for me to publish the research on just Visa alone, it would be beneficial for you (and me) to have both companies covered in the same deep dive. As a result, I’ll be reframing the Visa Inc deep dive to cover both investment cases.
This deep dive is one I’m taking very seriously and would likely be among the longest I’ve published, alongside the TSMC deep dive. The key reason for this is that understanding the intricacies of how Visa, Mastercard (and American Express) truly function could lead to even more investment opportunities for us in the broader payments space.
Premium readers will have access to valuation models of both Visa and Mastercard, and to give you an idea of what I’ll be covering in the deep dive, I’ve included the table of contents below.
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Here’s what I’ll cover:
Visa Inc deep dive table of content
History of Visa Inc: An overview of its creation within Bank of America, its mutualisation and later demutualisation, and how both shaped its moat and business quality today. Efficiencies gained post-IPO and case studies of Visa’s ability to withstand financial crisis, technological shifts and regulatory shocks.
Overview and analysis of the Global Payments Infrastructure: Analysis of the global payment infrastructure, overview of key players (issuers, acquirers, networks, processors and gateways), consumer to banks supply chain analysis, a comparison of payment networks by payment volume and transactions, the payments industry by type (credit, debit, bills), the growth of cross border payments, the value added-service market opportunity and how recent innovations like Buy Now, Pay Later (BNPL), agentic commerce, cryptocurrencies, A2A and national payment systems impact the open network model. Insights into Australia’s and the UK’s interchange regulatory changes impact to payment networks and state of the Chinese market access.
Visa versus Mastercard comparison: An up close comparison of the two largest open payment networks, market share across geographies, key business economics differences, growth and cost drivers, an overview of their products and service portfolio and acquisitions strategy.
Business and unit economics of Visa: A deep dive into Visa’s core revenue segments (service, data processing, international and others), revenue by region (U.S. and international), KPIs and an assessment of interchange fees and value-added services over the years. Analysis of its cost structure, efficiencies gained over the years, state of its legal and litigation liabilities and a deep dive into its unit economics across various transaction types (debit, credit, cross-border, BNPL on rails, etc.).
Growth potential: Analysis of its growth drivers in applications like e-commerce and agentic commerce, real-time and push payments, cross-border (B2B transactions and remittances) and insights into countries with growth potential (yield and volume changes to 2030 FY).
Risk and challenges: Further assessment of Visa’s relationship with governments, current litigation liabilities and pending cases, further analysis into the rise of national payment systems, operational and growth gaps to Mastercard, the ongoing credit card caps in the U.S., and the Big Tech threat.
Visa’s Valuation: An earnings multiples-led valuation and projection of its earnings potential through to 2030 FY, comparison with peers and the broader payments industry.
Mastercard’s valuation: Assessment of Mastercard’s business economics, earnings growth and valuation through to 2030.
Conclusion: The 30x P/E club - being a value investor in high P/E companies.