MASTERCARD: SURVIVAL IN A DECENTRALIZED PAYMENTS WORLD
Strategic Repositioning Memo
June 2030 | CEO Edition
TO: Mastercard Executive Team
FROM: CEO Office
RE: The Existential Threat to Our Interchange Model
Our business is being disrupted. This is not speculation. This is happening in real time.
Interchange fees are declining 2-3% annually due to regulatory pressure, merchant consolidation, and alternative payment technologies. If we don't fundamentally restructure Mastercard by 2035, we will be a low-growth utility company trading at 15-18x earnings, not the 40x+ multiple we command today.
We have a 60-month window to prove we're something other than "the company that charges fees on other people's transactions."
THE CORE PROBLEM
Interchange fee economics created a beautiful business: - Mastercard operates the rails but owns no inventory, extends no credit, and carries no balance sheet risk - We charge merchants 1.4% on average (down from 1.8% in 2024) - We keep about 0.18% per transaction as Mastercard's revenue - 40%+ operating margin
But this economics requires: 1. Merchants have no choice but to use Visa/Mastercard (antitrust moat) 2. Regulators allow fees to remain high (regulatory moat) 3. Alternative payment rails don't exist (technology moat)
All three of these moats are eroding simultaneously.
THE THREE-PART SURVIVAL STRATEGY
Part 1: Defend the Core Business
We're not going to win a battle against regulation or technology by fighting. We need to adapt.
Action: Propose proactive interchange fee reduction - Reduce interchange to 0.8-1.0% globally by 2033 - This gets ahead of regulation and removes regulatory risk - Margin compression: 15-20% on this business - But preserves the business from alternative disruption
Action: Build direct relationships with large merchants - Negotiate custom fee structures with Amazon, Walmart, Target directly - Offer data services, fraud prevention, analytics as value-add - Convert commodity interchange fees into relationship-based fees
Result: Stabilize core business at $6.5-7.2B revenue by 2035
Part 2: Become a Fintech Infrastructure Company
We're not a credit card network. We're a payment infrastructure company. This reframing opens new opportunities.
New Businesses to Build:
- B2B Payments Platform
- Enable corporations to manage payment flows across 180+ currencies
- Target: $2B revenue by 2035
-
Margin: 45-50%
-
Embedded Payments
- Enable developers to integrate payment processing into their apps
- Partner with Stripe, Square, Block, etc., instead of competing
- Target: $1.5B revenue by 2035
-
Margin: 55-60%
-
Fintech Platform Services
- Provide infrastructure services to fintech startups and banks
- Offer KYC, AML, fraud detection, compliance as a service
- Target: $1.2B revenue by 2035
-
Margin: 65-70%
-
Digital Wallet/BNPL (Buy Now Pay Later)
- Currently exploring through Mastercard Installments
- Target: $1.0B revenue by 2035
- Margin: 35-40%
Total New Business Revenue by 2035: $5.7-6.5B
Part 3: Invest in Alternative Payment Technologies
We should not be threatened by blockchain and stablecoins. We should own them.
Actions: - Mastercard has already partnered with Circle (USDC). Deepen this. - Invest in blockchain-based payment rails - Build Mastercard-branded stablecoin or CBDC interoperability - Position Mastercard as infrastructure beneath alternative payments
Potential Revenue Stream: Not material by 2035, but positions company for post-2035 future
THE FINANCIAL TARGET
2024 Actual: $10.2B revenue, 4.2% operating margin
2035 Target: $12-13B revenue (modest growth), 32% operating margin
Breakdown: - Core interchange business: $6.5-7.2B at 35% margin - Data services: $2.5-3.0B at 65% margin - New fintech businesses: $5.7-6.5B at 50% margin (blended) - Alternative payment technology: $0.8-1.2B at 40% margin - Total: $15.5-17.9B revenue (note: this includes consolidation of fintech acquisitions)
Actually, I need to reconsider. The fintech businesses would be additions to the platform, not separate. More realistically:
2035 Target (Revised): $14-15B revenue, 35% operating margin - This assumes interchange compresses to $6.5-7B but new services add $6-8B
THE ORGANIZATIONAL TRANSFORMATION
By Q4 2030: - Announce proactive interchange fee reduction plan - Launch B2B Payments product - Announce acquisition of fintech company to accelerate embedded payments
By Q2 2031: - Establish "Mastercard Fintech" as separate business unit - Hire Chief Innovation Officer from fintech/blockchain space - Begin building alternative payment rail partnerships
By Q4 2032: - Demonstrate fintech revenue is 20%+ of total - Announce that interchange fee compression is ahead of regulatory curve - Reposition company as "Fintech Infrastructure" not "Card Network"
THE HARD TRUTH
If we don't execute this transformation, Mastercard will be a $50-60B market cap company by 2035, trading at 15-18x earnings, with 4-5% revenue growth and declining margins.
If we do execute, we can be a $100-120B market cap company, still trading at 25-30x earnings, with 6-8% revenue growth and stable margins.
The difference is whether we lead the change or react to it.
I choose to lead.