Contrary to popular belief, eBay Inc (NASDAQ:EBAY) and Apple Inc.(NASDAQ:AAPL) are not hanging the sword of mobile payments over Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA)‘s necks, they are merely multiplying the revenues of these plastic manufacturers. On CNBC, Jim Cramer explained how people misunderstand the business processes running in the background of mobile payments which has made them to write off Visa and Mastercard.
“[…] The credit card is alive and well and the two main credit card companies, Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) actually benefit from all the mobile payment innovations that are causing the press to declarre that plastic is obsolete. The key thing to remember is that these are incredibly consistent payment processors […],” said Cramer.
What Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) offer to the payment industry is irreplaceable. A Global Payments network. According to Cramer, it is the heart and soul of the payment industry. 36 million merchants around the world accept Visa Inc (NYSE:V) and 36 million accept Mastercard Inc (NYSE:MA), said Cramer while explaining how vast the network of these two companies stretches.
In fact, as Cramer pointed out, both Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) are participating in Apple Inc.(NASDAQ:AAPL)’s new payment method. The same goes for eBay Inc (NASDAQ:EBAY).
The rise of eBay Inc (NASDAQ:EBAY) and Apple Inc.(NASDAQ:AAPL) in the payments industry means a revenue multiplication for Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) as they are not just the plastic cards that people carry around with them, they are the network that provides a connection with the bank accounts. The information stored on your device when you make a mobile payment is where these plastic card companies come in. Every time a payment is made, Visa and Mastercard take a small chunk of that payment.
Although Cramer liked both Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA) but he said if a gun was put to his head to pick one, he would go for Visa only because he expects the stock to gain 23% as compared to 17% by Mastercard Inc (NYSE:MA)
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