Visa, Mastercard, American Express, PayPal, and Capital One all profit from payment transactions, but their business models and risks differ significantly. Visa processed 74.2 billion transactions in its latest quarter, a 10% year-over-year increase, while Mastercard's revenue from value-added services surged 19%. PayPal's transaction revenue grew more slowly than its payment volume, raising concerns about its shrinking cut of transactions.
Visa earns fees by facilitating payments without issuing cards or lending money, resulting in a 13% revenue increase to $12.1 billion. Mastercard's revenue from services beyond the swipe now accounts for 41% of its net revenue, growing 19% to $4.1 billion. American Express combines merchant fees with lending, reporting an 8% increase in discount revenue and a 10% rise in net interest income.
PayPal's payment volume rose 6% to $487.1 billion, but transaction revenue increased only 3%, reflecting a shrinking share of payment volume. Capital One, primarily a lender, saw a 25% year-over-year increase in network volume after acquiring Discover, with discount and interchange fees totaling $2.3 billion. The company's net charge-off rate improved to 4.01% in the September quarter.
Analysts note that Visa and Mastercard trade at around 28 times earnings estimates due to their lower risk, while PayPal and Capital One are cheaper but face higher risks. American Express falls in between, trading at 16 times earnings estimates. Visa's stock is near its 52-week high at around $425, while Mastercard's growing services business gives it a slight edge.