The Battle of Payment Titans

Visa Inc. V and Mastercard Incorporated MA dominate the payments industry, benefiting from the ongoing global shift toward digital transactions. While they share similar strengths, each has distinct advantages and challenges. With market caps of $641.5 billion (Visa) and $498.5 billion (Mastercard), they form a powerful duopoly, which is often scrutinized by regulators.

Competitors like American Express Company AXP and Discover Financial Services DFS continue expanding their networks but remain far behind these two industry leaders. So, which stock offers the better investment opportunity today? Let’s start by examining the risks.

Regulatory Challenges: A Growing Concern

Both Visa and Mastercard are under increased regulatory scrutiny, particularly in the United States and the U.K. The Credit Card Competition Act of 2023 aims to curb their dominance by increasing competition and reducing merchant costs. However, given the current administration's business-friendly stance, any immediate impact seems unlikely.

In the U.K., the Payment Systems Regulator is considering fee caps and transparency measures after merchant fees soared, costing businesses an extra £170 million annually. Additionally, Mastercard was linked to nine unlicensed sites recently and Visa to two, leading to substantial consumer losses. While these challenges could somewhat pressure profitability, both companies maintain strong operational footholds.

Strong Operations Drive Growth

Visa’s emphasis on technological innovation is evident in products like Visa Token Service, Visa Checkout and Visa In-App Provisioning. The company is also capitalizing on emerging payment trends, including Buy Now, Pay Later (BNPL), crypto, and fintech partnerships. Contactless payments (Tap to Pay) now account for more than 80% of global in-person transactions. However, it anticipates adjusted operating expenses to witness high single-digit to low double-digit growth in fiscal 2025.

Mastercard, on the other hand, has strengthened its business through cybersecurity, data analytics and value-added services. Revenues from these segments grew 17.7% in 2023 and 16.8% in 2024. Mastercard’s digital expansion in Southeast Asia and Latin America fuels long-term growth but also introduces additional geopolitical risks. Notably, the company expects adjusted operating expenses to see low-teens growth in 2025.

Visa vs. Mastercard: Key Comparisons

Dividend Yield

Visa offers a stronger dividend yield (0.69%) compared to Mastercard (0.57%) and industry (0.67%), making it more attractive to income-focused investors. This higher yield reflects Visa's commitment to returning value to its shareholders.

Debt Management

Visa operates with lower financial leverage than Mastercard, indicating a more conservative debt management approach. Its total debt-to-capital of 34.99% is lower than MA’s 73.67% and the industry’s 43.13%. This lower leverage can provide greater financial stability and flexibility, especially in uncertain economic conditions.

Analyst Sentiment & Earnings Outlook

Analysts currently favor Visa over Mastercard, largely due to its stronger U.S. market exposure while Mastercard's greater international exposure could pose more risk due to geopolitical uncertainties.

The Zacks Consensus Estimate for Visa’s fiscal 2025 EPS implies a 12.4% year-over-year uptick, which witnessed 12 upward estimate revisions in the past 60 days against one opposite movement. On the other hand, the consensus mark for Mastercard’s 2025 EPS signals 9% year-over-year growth, which has witnessed no upward movement but 14 downward estimate revisions.

See the Zacks Earnings Calendar to stay ahead of market-making news.

Visa’s stronger earnings growth and positive analyst sentiment make it the more compelling choice. Moreover, buying V stock is a more cost-effective option now compared to MA.

Price Performance & Valuation

Over the past year, shares of Visa have outperformed Mastercard, the industry and the S&P 500 Index.

1-Year Price Performance – V, MA, AXP, DFS, Industry & S&P 500

Image Source: Zacks Investment Research

Yet, in terms of valuation, Visa is relatively cheaper than Mastercard. Going by its price/earnings ratio, Visa is trading at a forward earnings multiple of 28.63X, lower than Mastercard’s 32.71X.

Image Source: Zacks Investment Research

Image Source: Zacks Investment Research

The Verdict: Visa or Mastercard?

While both Visa and Mastercard are strong contenders in the payments industry, current analyses suggest that Visa may offer a more favorable investment opportunity at this time. Its strong U.S. market exposure, attractive valuation and positive analyst outlook position it well for potential investors. Investors should still consider their risk tolerance, as regulatory pressures could impact both firms.

Visa stock, rightfully, has a Zacks Rank #2 (Buy) now, whereas Mastercard stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Mastercard Incorporated (MA) : Free Stock Analysis Report

Visa Inc. (V) : Free Stock Analysis Report

Discover Financial Services (DFS) : Free Stock Analysis Report

American Express Company (AXP) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research