Mastercard (NYSE:MA) has a reputation for seasoned readers as a well-known credit card company. Younger readers will understand the brand — and Mastercard stock — in an entirely different way.

Fundamentally, MA is payment processing company. It acts as a middle man between merchants and customers and financial institutions.

A bank issues a credit or debit card to a customer that is supported by MasterCard.

When the customer uses that card, MA secures the transaction while the bank awaits payment.

On the other side of the transaction, Mastercard is the middle man between the merchant and the customer. MA gets a fee from the merchant and a fee from the bank for its services.

This has been a good business, especially since U.S. consumers drive about 70% of the economy. MA stock wins as consumers spend more, and more consumers enter the market.

The other strength Mastercard stock has is that it is backed by a global brand. MA operates in 210 countries worldwide and that kind of brand recognition is a great asset as new financial technology (fintech) companies pop up in various countries trying to take some business from larger global players.

One of the big changes in the financial sector recently has been the growth digital payments and everything that comes along with that.

We’ve seen the massive change that e-commerce has brought to retail. Now that change is happening in the financial sector. It has taken a while because there are far more regulations and protocols to sort out than there are on the retail side.

And you don’t have to imagine the growth of fintech, because if you understand how retailers have changed since e-commerce has become commonplace, simply remember that all those retail transactions are being done electronically, mostly with credit cards.

And it’s the volume of transactions that really matter to MA. Each transaction means a commission for MA. And that’s ultimately a big deal for Mastercard stock.

Bottom Line on Mastercard Stock

However, MA stock has much more going on than simply acting as a middle man for transactions. All this online activity means there’s a huge amount of financial risk if financial clients, merchants or customers get hacked.

These cybersecurity resources are a significant part of MA’s value-added business. Because of its size and breadth, the company has some of the best security in place for itself and its customers. It’s also well capitalized, so if there’s a breach, it’s not going to throw up its hands and shut down the business.

MA is in fintech growth mode right now, with acquisitions of smaller players coming quickly. It’s the main reason Mastercard stock is trading more like a tech stock than a financial stock.

Just this week it announced it is moving forward with the purchase of Transfast, a peer-to-peer (P2P) cross-border payments provider that operates in 125 countries and integrates with 300+ banks. P2P is a huge new market and this announcement shows that MA is staying ahead of the curve in this dynamic space.

All this and more reinforces why my Portfolio Grader has MA stock as an A-rated stock right now. And its 26% 12-month return is just a taste of what’s to come.

— Louis Navellier

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Source: Investor Place