The first Diners Club credit card was launched in February 1950 Diners Club card, used mainly for travel and entertainment, became the first credit card for widespread use and so, eventually changed the approach consumer shopping. Sixty years later, what is the status and future of the credit card industry?
Despite the “credit crisis” in 2008, not much has been said about the credit card companies and their role as providers of capital to individuals and families. The banks were guilty, but also the victims of the greatest decline in the stock market in decades. But the share price performance of credit card companies that are publicly traded (AMEX, MasterCard and Visa) has been impressive.
Since April 2008, with the S & P 500 has lost nearly 33% on a cumulative basis, all three companies have carried out market.
The functioning of the markets for credit card companies is not surprising. The reduction in interest rates because of the recession have made financial institutions to reduce borrowing costs, causing nah city safe from crisis, individual consumers and families seem to have had a favorable environment. It ‘was operating income of Visa’s $ 2 billion in FY09, up 13% over the previous year.
A company credit card is a network of processing, in which issuers and buyers transfer payment from the cardholder to the merchant. In the process, merchants pay fees for processing payments and holders pay interest on credit card balances. This is a very profitable business model, but it would be a mistake to assume that the credit card issue credit cards. Or determine what they charge to customers or merchants to pay taxes to the buyer.
Visa, MasterCard, AMEX and make money from fees that issuers and acquirers to pay. These systems generate profits leads to a structure atypical budget. MasterCard, for example, is $ 6. 4 billion company (the end of 2008), of which $ 4. 3 billion in cash and other liquid assets, intangible assets are $ 700,000,000, and $ 500 million of deferred taxes. On the liability side, the company has almost no debt and is financed mainly by current liabilities, and $ 2 billion in capital. Visa is also impressive, with 20 billion U.S. dollars in intangible assets of a total size of $ 32 billion, of which $ 8,000,000,000 is liquidity.
Who would not want to invest in these companies? They are swimming in cash, is highly profitable and can navigate through a financial crisis, transferring the risk of interest rate for customers, issuers and buyers. Since the IPO in 2005, the total return of the material MasterCard has more than 500%, representing a return of 38% per year.
But unfortunately it is something that needs no credit card products, is the investor. They are rich, do not need to finance large investments. However, it seems that MasterCard went public, as well as Visa, in 2008. Their reasons are non-financial. MasterCard has a serious problem with the image.
MasterCard solved their problems by going public, earning a reputation through his performance and after-sales for the majority of funds for residential rsintroduktion a foundation. Show had to create an escrow account to cover disputes (about 3 billion dollars) has been launched against the company from American Express and Discover, among others. Their stock prices were among the most successful of recent years.
What would happen, but if, as some commentators say, is the next financial crisis, a crisis of personal credit? First, it looks like a crisis now more distant than ever. With interest rates low and social pressure, a crisis of credit for families would be the last event that any government could now afford.
I also hope that this article makes clear that there would be credit card companies that suffer most – is shielded the cash, not directly affected by standards for the end user and property ; banks, which are much healthier than two years ago. There is no reason to doubt that the first credit card was launched 60 years ago will not continue to evolve and to become part of the wo r every day for the next decades