Yosef Cohen is a Junior Financial Analyst at I Know First.

MasterCard Stock Forecast

Summary

• MasterCard remade their logo which shows their company is prepared for the 21st century
• Brexit may have hurt MasterCard for now, but MasterCard will rebound from the drop in stock price
• A newly announced lawsuit may hurt MasterCard several years down the road
• MasterCard has, and will continue to expand their products that works on making payments more convenient to all
• MasterCard is working on expanding their consumer base in countries where they have a weak presence
• The I Know First algorithm is currently bullish on MA in the long term

What MasterCard Really Does

Quick! In what business is MasterCard Inc. involved in? Chances are you immediately thought of your credit card. Unknown to most, MasterCard is actually a tech company in the “global payments” industry. The difference between that and just making credit cards is that like most products, credit cards will eventually stop being used. Global payment is just any way of paying for a service which has and will always be around as long as our species continues to exist. MasterCard is constantly at work to find new and easy ways to make payments. MasterCard’s CEO, Ajay Banga, has MasterCard Labs working assiduously to find out how MasterCard can expand its market-share and predict what people want before they even know it themselves.

Refacing MasterCard: A New Logo

MasterCard has one of the most well-known logos in the world, so why would they change it? This could potentially harm their brand recognition and down the line, their revenue. Luckily, the logo closely models the old logo so that shouldn’t be an issue. The old logo features red and yellow circles with alternating colored stripes at the center where the circle overlaps. “MasterCard” is written in large, white letters over the two circles. The new logo, designed by Michael Bierut, features a red and yellow circle overlapping (like the old one), but the overlapping part is orange and doesn’t have stripes. The word “mastercard” is written in all lowercase letters and is very round. This makes the logo look sleeker which is more appealing to the eye and is a theme for nearly everything in the 21^st century. The updated logo seems like it will catch on quickly and is a motif for MasterCard’s adapting nature to technology in the 21^st century.

A Stark Drop in Stock Price – Brexit’s Effects     

MasterCard has been one of the many companies that have fallen once the United Kingdom announced they were leaving the European Union. The stock skidded 7% immediately after the decision to leave the EU and still has not completely recovered. But will MasterCard really face long-term damage from Brexit? Consumer spending has fallen post-Brexit in the short-run but not enough time has passed for the effects to be known. Logically, consumers will still have the same necessities, plus less luxury spending will be balanced out by higher prices for other goods, So there is no real loss on the side of MasterCard as a result of Brexit. Credit cards will be used anyway and just as often. The drop in stock price was based on an ephemeral fear of change which caused MasterCard’s current stock to be undervalued. Therefore, the time to invest in MasterCard is now.

A Hefty Lawsuit

Besides for Brexit’s adverse effects on MasterCard, the United Kingdom could also be the source of a loss of about 24 billion dollars in a giant lawsuit against MasterCard. The reason for the case is that MasterCard unlawfully charged (as decreed by the European Union) customers pin and chip fees in shops to use their credit cards. Regularly, it wouldn’t be worth it for each individual customer to sue MasterCard for several hundred dollars, but class action lawsuits have just become legal in the UK, so everybody affected by this problem could sue in one massive case. Each customer who used MasterCard in the UK over the last 16 years can get about $600 in this case. This lawsuit has just been filed and can take several years to be completed. MasterCard released a statement saying, “Electronic payments deliver real value to people online, in-store and everywhere.” MasterCard sees the fee as necessary for the service they are providing. It is too early to say whether or not the lawsuit will be successful but its effects will not be felt on MasterCard’s stock for several years until the case is closer to completion.

MasterCard’s Vision – A World Beyond Cash

MasterCard’s vision is that every device has the potential to become a commerce device. This extends beyond the concept of credit cards and would allow for much more convenience in paying for things. For example, Apple Pay and Android Pay allows payment through a phone. Apple Pay authenticates the charge through Touch ID. These both will lead to MasterCard’s services being used more often out of convenience. These also have additional layers of security to prevent identity theft.

Other recent commerce devices made by MasterCard include the Family Hub fridge and the Whirlpool app. The Family Hub Fridge is a joint effort between MasterCard and Samsung to allow people to order groceries off of a screen on the fridge which is also its commerce device. This year, the Whirlpool app was released on the App Store. Whirlpool allows for payment at laundromats without having to use quarters. These solutions are extremely efficient and will catch on more as time progresses.

Another well-known service provided by MasterCard is Masterpass. Masterpass allows people to store all their credit cards’ information in one place. This technology released in 2013 and allows people to skip the process of reentering all their credit card information. On July 15^th, the service has been updated so that it’s useful in 3 ways. Masterpass can be used online as a buy button where you don’t need to input any information. It can also be used by terminals in over 5 million stores in 77 countries but it is available for only Android phones as of right now. The last use is on phones through certain apps such as Facebook Messenger for JetBlue and Bluetooth vending machine payments. This is another instance where MasterCard is trying to make payments as simple as possible to reach more consumers.

MasterCard’s Tomorrow

Those were ideas that MasterCard has put into practice, but what are some ideas MasterCard will bring to fruition in the future? Well, MasterCard is looking into turning every device into a payment device. This was seen in last October when MasterCard unveiled a new program. MasterCard is partnering with several companies to make keys, rings, and fitness bands, as well as other objects, that will be commerce devices. This entire project is a push to make using MasterCard so convenient that everybody will prefer it to cash. There will be a commerce device preferable to each person and this will get more consumers to use MasterCard.

Reaching New Markets

Besides for offering more products for use, MasterCard can be more lucrative only by increasing the amount of people who use their products. Today, cash still accounts for 85% of all global consumer transactions. The problem most people have is that many stores don’t accept anything but cash. On June 27^th, MasterCard set a goal to add 40 million micro and small merchants to electronic solutions. This will trickle down to make more people apply for credit cards out of convenience and to shop in these stores. MasterCard is working with certain countries in particular to include a lot of their population in electronic payment solutions. Soon, most of the populations of Rwanda, Egypt, and Bangladesh will have access to the financial mainstream which will give MasterCard more business.

Conclusion

MasterCard is working indomitably to expand both its products and consumer base. MasterCard’s goal is to make payments as convenient as possible and have their services used by the entire world. The global payments industry is still rising and MasterCard is up to the challenge to rise along with it. Their new logo shows how they are ready for the 21^st century. MasterCard has a lot of room to grow and they are the company that will be able to do just that.

I Know First’s algorithm forecasts how stocks are going to perform for 1 day, 3 days, 1 week, 1 month, 3 months, and a year. In the case of MasterCard (MA), the middle row represents the signal strength and the bottom number represents the predictability indicator, the historical correlation which is heavily weighted on the algorithm’s recent predictions. For the one month forecast, MA has a signal strength of 49.88 and a predictability of .25. For 3 months, MA has a signal strength of 87.17 and a predictability of .3. Lastly, for the year-long forecast, MA has a powerful signal strength of 527.92 and a predictability of .52. The I Know First algorithm is predicting MA to be bullish in the long-run. This is based on news the algorithm has heard about concerning MasterCard. To learn more about how I Know First’s algorithm operates, click here.