Can Mastercard Outmaneuver The Threat Posed By Stablecoins?

Summary Some think stablecoins are primed to disrupt card networks like MasterCard, due to their lower fees, instant settlement, and programmability. However, this ignores MA’s multi-token network (MTN), which looks primed to capture new payment volumes without sacrificing much in the current card business. This could lead to a new revenue opportunity, and as a result, we think the stock looks reasonably priced. While there are some risks around payments’ cannibalization if crypto gains widespread consumer adoption, we think MA remains a ‘Buy’ in today’s market. Everyone knows that MasterCard ( MA ) is an absolute juggernaut in the world of traditional payments—a company synonymous with credit and debit cards, significant scale, and global trust. Off the back of the firm’s significant card and payments businesses, it’s built itself into a multi-hundred-billion-dollar stock, with strong opportunities for continued top and bottom-line earnings growth in the coming years. With a bolted-on services segment that is starting to approach 40% of the company’s overall revenue, MA’s diverse revenue streams, legacy positioning, and high structural margins provide a significant economic moat to investors. Recently , legislation passed in the Senate ( The GENIUS Act ) has caused some jitters in MasterCard’s stock, with many uncertain if newly empowered crypto payment rails will siphon business away from the more traditional card companies. The bill, for reference, gives stablecoins a strong legal framework, which should allow for significant institutional adoption. The bearish thinking here goes that crypto rails are cheaper than card network rails, and future payment volumes will begin to shy away from MA’s traditional payment network. To be blunt, we don’t think this is a real risk for MA—for a number of reasons. First, mass market card payments should remain largely undisrupted, as they provide a better experience versus paying for goods and services on crypto rails. We’ll touch more on this later. Second, MA is partnering with crypto firms to provide on and off-ramps for crypto assets, allowing easy spending of stablecoins and other digital currencies. This proves that the company’s wide merchant acceptance and improved buying experience are still attractive—even to crypto natives. Finally, MA’s multi-token network should capture significant new market share in the coming years, as its ‘private blockchain’ approach blends current, core competencies (like real-world merchant acceptance and value-added services) with digital assets like stablecoins. As more transactions flow across MA’s multi-token network, the company stands ready to monetize the opportunity. Today , we’ll give our outlook for the stock, and explain why we see this top legacy payments firm as potentially succeeding as the financial landscape continues to shift. Sound good? Let’s dive in. Financials Before diving into the potential impacts of stablecoins (and crypto) on MasterCard, we should probably discuss the company’s current, core business first. In short, MA operates in two main revenue segments: the Payment Network, and the Value-Added Services and Solutions segment. In 2024, the payment network produced roughly $17.3 billion in revenue, and the services segment produced roughly $10.8 billion in revenue. Year over year, the company’s business has been strong, and for the last decade or so both major card companies — including Visa ( V ) and MasterCard — have been able to produce top and bottom-line growth in the low to mid-teens range. This wasn’t any different in Q1 of 2025 , when MA produced $4.43 billion from its payment network, and $2.82 billion from its services segment — up 16% YoY and 18% YoY, respectively: Seeking Alpha Payment network net revenue increased 16% , primarily driven by domestic and cross-border transaction and volume growth. It also includes growth in rebates and incentives. Value-added services and solutions net revenue increased 18% . All of this is to say that the company’s organic business should continue growing quite well, as GDP growth, inflation, and increased card adoption (& pricing) drive profitability for shareholders. Of note, MA operates an incredibly high-margin business model as the company’s card network is already built out, offering significant network benefits to cardholders, and pricing power that ultimately benefits shareholders. As we mentioned, recent stablecoin legislation has led to some worries about whether or not MasterCard may lose its premier, high-margin position in the payments world, as merchants like Amazon ( AMZN ) and Walmart ( WMT ) have reportedly explored the idea of launching their own stablecoins. In case you’re unaware, stablecoins are crypto assets that are fully backed (1 to 1) by USD reserves. Traveling on crypto payment rails—as opposed to traditional payment rails—stablecoins represent a potentially quicker, faster, and more efficient way to move money around versus legacy networks. This is the core risk—that MA will get disrupted. However, we see MA as being largely immune from these threats. There are two ways to view this—over the short term, and over the long term. Over the short term , we don’t expect much will change. This is due to the strength of MA’s current user experience, as well as the revealed preferences of those who use cryptocurrencies. Right now, a large percentage of MasterCard’s payment revenue comes from consumer purchases at merchants and retailers. What many often forget in this conversation is that crypto transactions are not free , requiring gas fees to move money from one wallet to another. On large payments, this percentage fee can be quite low. However, on smaller payments, especially if sent over slower networks like Ethereum ( ETH-USD ), MasterCard’s fees may end up being lower for consumers. At the same time, shopping with a card provides a considerably better experience to both merchants and retail customers, given established norms, like fraud prevention, transaction disputes, and rewards programs. Since MasterCard shares interchange fees with partner banks, many card issuers offer cashback and other rewards to users. Between the convenience, protection, and cash back, we think cards are here to stay. None of these benefits exist within crypto right now, and we’re skeptical that they ever will. This is due to the ‘one-way’ nature of transactions in crypto. Once money is sent, you can’t get it back. We’ve seen some centralized players attempting to build out crypto e-commerce tools, but it remains to be seen how effective these will be. Coinbase’s tools — in particular — also appear to be a ‘niche’ solution, given that users already need USDC (on the base chain) to buy things with this payments stack. On the flip side, MA has partnered with numerous exchanges and crypto wallets to enable real-world card/spending access, which reveals that between crypto and MA, MA’s network of merchants is a stronger competitive advantage than crypto’s lower cost base: We’re collaborating with cryptocurrency platforms to allow consumers to spend their cryptocurrencies, including stablecoins, at more than 150 million Mastercard acceptance locations worldwide. Kraken, OKX, and Bleap are among our newest card issuance partners helping to connect the crypto economy to everyday spending. At the same time, MasterCard hasn’t been resting on its laurels. Over the long term, we think stablecoin adoption could be a growth driver for MA. This all comes down to the MultiToken Network, or ‘MTN’. This private blockchain is a payments network built to facilitate real-world fiat settlement in addition to digital asset settlement, all in the same place. It works by tokenizing fiat payments onto the private blockchain, thus making them able to intermingle with digital assets. MA is in a unique position to enable this, as the private blockchain approach allows these tokenized fiat positions to be validated unilaterally. When combined with MA’s partnerships with a number of stablecoin issuers like Paxos, we think MA’s MTN will hoover up a large portion of new stablecoin volumes, especially as institutional adoption is set to increase. B2B payments could even be in the cards: Behind the scenes, we have enabled stablecoin settlement on the Mastercard network itself. We’re working with FinTech to acquire Newway to enable the option to settle payments in stablecoins for their merchants. And we help make these payments secure with Crypto Secure, now actively monitoring risks for hundreds of issuers globally. This is in addition to our work on blockchain technology to unlock faster and more transparent cross-border B2B payments with our multi-token network which we discussed last quarter. This ‘owned’ approach also allows the company’s existing value-added services to act as a layer ‘on top’, thus preserving that revenue opportunity. When combined with the transaction revenue potential here, we think MA is in a perfect place to abstract away the annoyances of crypto, while providing many of the benefits to users. We expect that fees for stablecoin transactions sent through this network will have lower margins than current card fees, but with strong brand trust, considerable network advantages, and the new B2B/cross-border opportunity, we could see considerably higher payment volumes, offsetting margin compression risks. Over the long run, we see MA as being a trusted payment network for all types of payments, to all types of counterparties, using MTN as the core clearing platform. With services on top, we think this represents a significant expansion of MA’s business vs. where it sits today. Valuation On the valuation front, MasterCard remains priced as a premium play in the payments space, trading it roughly 34x earnings. This compares slightly unfavorably with Visa, MA’s core peer, which trains at 30x earnings: Seeking Alpha That said, if you account for MasterCard’s higher level of expected growth, a few years out MasterCard is trading at roughly the same price as V. On a sales basis, both companies are almost exactly the same multiple, and versus other peers like Fiserv ( FI ) and PayPal ( PYPL ) MasterCard trades at a significant premium: Seeking Alpha This, however, has to do with MasterCard’s significant margin advantage, which we expect could remain stable in the coming years, especially versus a company like PayPal which has limited levers for growth. We also prefer MA by a wide margin to V, which has gone a different way with respect to the stablecoin/crypto opportunity. V is looking to offer crypto-linked cards , in addition to its tokenized asset platform, which links to public blockchains like Ethereum and Solana. To us, this approach fails to capture the ‘base level’ opportunity here, and it remains to be seen how the company’s margins and growth will develop over the long run. If you don’t control the payments infrastructure and offer great functionality, it’s hard to command a premium for the ‘on top’ fees you charge. This makes MA and its MTN quite attractive in our eyes on a comparative valuation basis. Finally, through a more historical lens, MasterCard is trading in a slightly above-average range. If you take a look at the stock’s five-year linear regression and standard deviation bands, you can see on both the top and bottom line the company is trading above its historical average: TradingView TradingView However, both multiples remain within the broader deviation channel, indicating that the stock is not yet overheated . It’s worth pointing out that investors largely treat MA as a legacy payments play, which overlooks the blockchain-related optionality. As the firm’s multi-token network is set to expand, processing digital and fiat payments in a hybrid way, it will likely provide an additional revenue opportunity for the company, even if margins come in somewhat. Between MA’s strong legacy moat, competitive UX, and unique position as a bridge between the legacy and digital payments space, we think the growth outlook remains strong, and could even improve with the addition of increasing stablecoin volumes. Trading at a fair price, but with the optionality of multiple growths (in the event that MasterCard wins significant market share), we think the stock looks like a ‘ Buy ‘. Risks With respect to the conversation we’ve had so far about stablecoins, the core risk for MasterCard is that in attempting to capture new stablecoin payments market share, the company may ultimately cannibalize its own rails over the long run. Similar to how the price war amongst retail stockbrokers forced commissions to zero in the late 2010s, there’s always a risk that MasterCard could cannibalize its own business by integrating digital payments without providing additional value. As we mentioned above, we think MA’s card payments business will remain largely unaffected by stablecoin/crypto developments, but if things move more towards crypto on the consumer side, then it may be tough for MA to justify charging fees for moving money around. If consumers go to the trouble of adopting fully digital wallets, that’s a big negative for MA. Summary That said, while some have seen the entry of stablecoins and potentially cheaper crypto payment rails as being a ‘net negative’ for MA, we see the opportunity to bolt on additional revenues and make current rails more efficient, without sacrificing too much in the way of current business. Full crypto adoption amongst the populace would likely be a negative, but if MA can leverage these new rails to win business and grow revenues (which we think is likely), then stablecoins could actually act as a long-term growth driver for shareholders. As the payment landscape evolves, we expect MA’s historical advantages, robust consumer relationships, and unique position within the payment ecosystem to allow management to capitalize on this opportunity. Thus, leading us to re-iterate our ‘ Buy ‘ rating. Stay safe out there!

Source: Seeking Alpha