Why Visa and Mastercard Shares Just Hit Their All-Time Highs

The U.S. Senate passed the $1.9 trillion stimulus over the weekend, and the CDC provided some more positive news as well.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Visa (NYSE: V) and Mastercard (NYSE: MA), the two largest payment-processing companies in the world, both saw their stock prices hit new all-time highs on Monday on more positive reopening and stimulus news.

At one point earlier in the day, Mastercard saw its stock rise as much as 6%, and at the time of writing trades around $373. Shares of Visa rose as much as 5% today and currently trade around $222.

So what

Over the weekend, the U.S. Senate approved President Joe Biden's $1.9 trillion stimulus bill, all but guaranteeing it will be passed into law.

Also today, the Centers for Disease Control and Prevention provided guidance that said fully vaccinated people could meet with other vaccinated people and some unvaccinated people indoors without masks.

This news is great for Visa and Mastercard's business model. While you may see their logos and brand names on your credit and debit cards, Visa and Mastercard do not actually extend credit.

Instead, they set up the card network for transactions to be made among financial institutions, merchants, and consumers, and they collect fees based on volume. So, more money in people's pockets from economic stimulus and more positive reopening news will likely translate into more spending.

Now what

While the pandemic caused some short-term pain for Visa and Mastercard, it will likely prove to be extremely beneficial long term because it has significantly advanced the use of digital payments.

In 2019, Mastercard said that card payments only made up about 13% of the $235 trillion payments market, leaving huge growth potential for digital payments.

With some research firms and banks projecting gross domestic product (GDP) to surpass 6% in 2021, that would be the highest GDP growth since 1984. It's hard not to like Visa and Mastercard in this environment with pent-up demand and a heavier reliance on digital payments than ever before.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard and Visa. The Motley Fool Australia has recommended Mastercard. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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