MasterCard (NYSE: MA) is a payment solutions company that provides transaction processing and related services to financial institutions in support of their credit, deposit access, electronic cash, and automated teller machine payment card programs.
MasterCard has a transaction based business model where it makes its money based upon how often its cards are swiped. Every time a customer uses the card, the bank that issued the card pays MasterCard a small fee. MasterCard is solely a transaction processor, it does not have any credit risk from individuals carrying credit card balances that they may or may not be able to pay off. That credit risk is borne by the bank that issued the card.
Demographic trends seem to be strongly in MasterCard's favor with the use of cash and checks in decline as consumers pay for everything from gas to groceries to a night out on the town with plastic.
Related Fool Articles
Recent Mentions on Fool.com
- 3 Financial Sector Stocks You Can Buy and Hold for the Next 25 Years
- If You Like Apple Pay, You'll Love the Potential for These Stocks
- Why Mastercard, Inc. Charged 10% Higher in February
- 3 Stocks Pre-Retirees Can Buy and Hold for the Next 20 Years
- The $14 Billion Difference: How Visa, MasterCard, and American Express Make Money