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Behind the brand:

'Boutique hotel at sea': Virgin Voyages CEO hails Branson's 'biggest endeavour'

On board entrepreneur's latest venture

Mastercard Expands Portfolio to Aid Startups & Fintechs

Zacks Equity Research
·3-min read

Mastercard Incorporated MA recently expanded its Accelerate portfolio, which was launched last year to enable the company to work with several fintechs in a simplified manner. The expansion has been carried out through two programs included in the company’s Accelerate portfolio — Mastercard Start Path and Mastercard Engage.

Through Mastercard Start Path, the company assesses over 1,500 applications from startups every year and shortlists around 40 of them, which showcase promising technologies. This time, the company has invited 11 new startups to its Start Path program. The main purpose of this initiative, which is a six-month virtual program, is to offer technical guidance and operational assistance to these startups. This will provide startups with the opportunity to grow and add scalability to their businesses.

Worthy of mentioning, the Start Path program has an impressive history of inviting over 230 later-stage startups since 2014 for joining the program. Several startups, which have been part of this program, have raised $2.7 billion in post-program capital and also tied forces with Mastercard, banks, merchants and renowned organizations.

Coming to the second program, Mastercard Engage has been making efforts to connect fintechs, banks and merchants with its strong network of technology partners. Fintechs have been focusing on innovation and enhancement of their payment solutions to better serve consumers considering the global shift toward digital payments.

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With regard to this, Mastercard has been expanding its Engage program by signing around 50 new deals with technology partners in first-quarter 2020. Through this program, the company enhances the capabilities of more than 170 technology partners for providing new solutions. These partners, which are part of the Engage program, adhere to Mastercard certification and rules of innovating solutions.

Shares of this company have gained 19.9% in a year compared with the industry’s growth of 8.2%.

The company’s peers, namely, Visa Inc. V have rallied 12% in a year’s time, while that of American Express Company AXP and Discover Financial Services DFS have lost 18% and 32.4%, respectively, in the same time period.

Notably, digital transactions have been gaining momentum globally for quite some time, with the COVID-19 pandemic accelerating the trend further. This trend is likely to sustain even beyond the pandemic. We believe that the growing popularity of contactless payments and the rising adoption of digital transactions worldwide are likely to position Mastercard well for long-term growth.

However, disruption caused by the pandemic has affected the company’s revenues, which plunged 17% on a currency-neutral basis in second-quarter 2020. The decline was primarily due to a decline of 10% and 45% in gross dollar volume and cross-border volume, respectively, on a local currency basis. Dip in switched transactions of 10% also hampered the top line.

Nevertheless, the company’s strategy to invest in organic and inorganic growth opportunities bodes well. Mastercard’s strong brand name, vast business network, global presence, investment in technology, several partnerships and acquisitions should help it easily tide over the current economic difficulties.

The stock carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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