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Mastercard SWOT Analysis 2022: A Battle for Two Rivals

PESTLEanalysis Team
PESTLEanalysis Team
Table of Contents
Table of Contents

Our Mastercard SWOT Analysis gets an insight into the internal and external factors that affect the operations of Mastercard.

Have you ever thought about how payment methods have evolved over the years, from gold coins to paper notes and now through cards?

Out of all the payment methods mentioned above, payments through cards are considered the most convenient since carrying cards is way more convenient than handling paper money or coins.

We use debit and credit cards for daily payments without even realising how money is transferred from our account to the receiver's account just by swiping our cards. One of the companies responsible for making these payments possible is Mastercard.

Mastercard is one of the top companies that provide multinational financial services. In today's article, we will discuss the operations and significance of Mastercard. Moreover, we will also conduct Mastercard SWOT Analysis to get an insight into the internal and external factors that affect the operations of Mastercard.

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MasterCard is a global payments company that helps individuals, businesses, governments, and institutions to transact across the globe using simple, secure, and fast payment methods.

It offers a wide range of payment products to its over 1.9 billion card members worldwide, making Mastercard one of the biggest brands in the global payments industry. The prime objective of Mastercard is to help people in all countries make easier and faster purchases.

If we look at Mastercard's history, we know that the company came into being in 1966 after small and large banks joined hands in the regional bank association to develop a product that could compete with Bank of America's Bankamericard.

Mastercard started providing debit and credit cards to financial institutions just like Bankamericard.

In 1968, Mastercard was introduced outside the US for the first time. Besides expanding its operations, it also started focusing on innovation and adopted the first computerized authorization, clearing, and settlement process. Moreover, it also introduced the first magnetic stripe on its credit cards to prevent fraud.

Mastercard purchased the largest ATM network to facilitate cash delivery to its customers as it grew. After some time, finally, the company decided to go public through an IPO in which 95.5 million shares of Mastercard were sold at $39 per share.

Currently, Mastercard provides its services in 210 countries and territories. Through these countries and territories, the company managed to generate revenue of $18.8 billion in 2021.

Besides generating significant revenue, Mastercard also contributes to the global economy by providing jobs to 24,000 people.

Now that we have discussed the history of Mastercard and its current operations in detail, let's proceed further and carry out its SWOT analysis. First, however, you must know what SWOT analysis is.

SWOT analysis is used by businesses to analyze the internal and external factors that affect a company's performance. A SWOT template highlights a company's strengths and weaknesses. Moreover, it also identifies the opportunities ahead of a company and threats that it has to face from the external environment.

Let's conduct Mastercard's SWOT analysis to find out the internal and external factors that impact the performance of Mastercard.

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Photo by Tima Miroshnichenko

Strengths of Mastercard

The strength of a company is what gets them the win when it comes to beating the competition. Therefore, the more strengths your company possesses, the better off you will be in the long run.

Like any other company, Mastercard also possesses several strengths. In this section, we will analyze some of Mastercard's strengths.

Vast Global Presence

Companies are always looking for ways to increase their reach and spread their operations to different parts of the world. The main objective of having a global presence is to engage with maximum customers so that an increase in revenue can be observed.

Mastercard is among those few companies that operate on a global scale. The company operates in more than 210 countries and territories. Operations at so many different geographical locations increase the customer base of Mastercard and increase its annual revenue.

Second Most Purchased Payment Card

Any brand wants to hold a significant share of the market since this helps the brand grow in terms of operations and finances.

Mastercard is famous for providing quality service to its customers. This is why its credit and debit cards are the second most purchased payment cards after Visa in the US. This means that along with Visa, Mastercards dominates the US market.

High-Profit Margins

The main objective of all the companies is to make a profit. Therefore, companies try to broaden their profit margins to maximize their profits. Ideally, companies operating in an industry with low competition and high supplier power manage high-profit margins.

Since Mastercard is a company that holds a significant market share in the financial service industry, it also manages to operate at high-profit margins.

In 2021, Mastercard managed to retain a profit of $8.6 billion, which was around 45% of its total revenue in 2021. One reason Mastercard can retain high profits is that there isn't much competition in the industry in which it operates.

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Photo by CardMapr.nl

Weaknesses of Mastercard

Weaknesses are the limitations of a company, but that does not mean that the company cannot provide good services or products since all companies possess weaknesses and strengths. In this section, we will analyze some of the weaknesses of Mastercard.

Data Breach Controversy

As the world has become aware of the significance of data, strict actions are taken on data breach incidents. Therefore, companies that have data of their consumers stored need to be careful and ensure no data breach incident takes place.

Mastercard has to deal with customer data because of the nature of its operation. However, in 2019, claims were made that Mastercard's data of 90,000 Germans were breached. This news damaged the reputation of Mastercard and created mistrust among its users.

Poor Financial Management

Any business competing in the market should manage its finances most efficiently. Finances are the roots of any business. Therefore, to succeed, it is essential to have well-planned finances.

Mastercard holds a dominant share in the market. However, its poor financial management can affect the company's performance. The current ratio is a financial indicator that shows the current assets and liabilities ratio.

Generally, a current ratio between 1.2 and 2 is considered good. However, Mastercard's current ratio for the previous quarter was just over 1.2. This shows the weak financial position and poor financial management of the company.

High Operating Expenses

Businesses are always looking for ways to lower operating expenses so that maximum profits can be enjoyed. However, for that, continuous innovation and research are required.

Mastercard has high operating expenses as it spends money on R&D and innovation to provide the best product to its customers. In 2021, Mastercard spent $8.8 billion on its operations expenses.

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Opportunities for Mastercard

Businesses get the opportunities that change their fate. However, businesses have to suffer losses if these opportunities are not availed at the right time. So let's examine what opportunities Mastercard has to expand its operations further.

Collaboration With Fintech firms

A famous business saying goes, "If you can't fight them, befriend them." It is impossible to fight with all your competitors. Businesses often have to look for other ways to eliminate competition.

Instead of competing with the upcoming phenomenons, collaborating can help businesses stay relevant in the market.

Similarly, Fintech firms are the new phenomenon in the market that facilitates financial transactions. Although they pose a threat to Mastercard, Mastercard can still collaborate with the top Fintech firms to affirm its own position in the market.

Newly Emerging Markets

New markets always provide the opportunity for growth to already existing companies. New markets are also emerging as developing economies are emerging all across the globe.

Currently, the demand for digital payment and transactions is increasing in developing economies which means the number of potential customers of Mastercard is increasing in developing countries.

This increase in demand for digital payment and transactions can increase the customer base of Mastercard, which will result in an increase in its revenue.

Boom In Online Shopping

Over the years, as internet usage increased, a trend of online shopping was initiated. However, COVID-19 played a significant role in shifting people to online shopping.

This boom in online shopping provides Mastercard with an opportunity to increase its customer base. In addition, since all online payments are made through debit or credit cards, demand for Mastercard's payment cards may increase in the future.

Threats for Mastercard

Different businesses face threats from their external environment based on the industry in which they operate. This is the last section of Mastercard's SWOT analysis. In this section, we will have a look at some of the threats faced by Mastercard.

The arrival of Fintech Firms

The arrival of competitive firms in the industry always worries the existing firms because they can snatch the market share of pre-existing firms. Now, if we talk about the payment industry, it was previously dominated by a handful of companies like Visa and Mastercard. However, now, fintech firms have arrived in the industry.

Fintech firms are changing the dynamics of the payment and digital transaction industry. This is because fintech firms have developed alternative payment methods like mobile device payment systems, e-commerce payment systems, and wallets that work through the internet.

Since these payment methods are less expensive than consuming the services of a Mastercard, consumers of Mastercard may start switching to fintech soon.

Global Recession

When there is a recession, businesses suffer the most. One of the worst things about recession is that it lowers people's living standards, resulting in their consumption falling.

COVID-19 has played a significant role in dragging the world close to recession. However, the war between Russia and Ukraine has brought us closer to a global recession. In case of a recession, people's consumption will fall, and people may pull out money from banks. All this can be damaging for Mastercard.

Russia-Ukraine War

Since the war between Russia and Ukraine started, many businesses have pulled out of Russia due to the call for sanctions from western countries. However, Mastercard has operated in Russia for 25 years and has many consumers there.

However, after the invasion of Ukraine, Mastercard decided to suspend its operations in Russia. By doing so, Mastercard suffered a substantial financial loss. Moreover, Mastercard is expected to suffer more financial loss in the future if the war doesn't stop now.

Mastercard SWOT Analysis: Final Word

Now that we are finally done with our Mastercard SWOT analysis let's summarise whatever we have discussed.

So, we started by introducing you to Mastercard and telling you what exactly Mastercard does. Then we moved ahead and discussed how it came into being and its journey.

After that, we shed light on the current position of Mastercard by analyzing its revenue and position in the market.

After getting enough insight into the company, we proceeded further and conducted Mastercard's SWOT analysis.

The SWOT analysis allowed us to see Mastercard's strengths, such as having a vast global presence and high-profit margins. Moreover, it also sheds light on some of the weaknesses of Mastercard. For example, Mastercard has been a part of some controversies.

Besides the internal factors, we also learned about the opportunities available for Mastercard and some of the threats the company faced from the external environment.

SWOT analysis is a very informative and effective business tool. You can also display the findings of a SWOT analysis in a less complex way with the help of a SWOT matrix. After reading this article, you must have learned how to conduct a SWOT analysis. However, if you still have some questions, look at some examples of SWOT analysis to get your questions answered.



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