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Mastercard (MA) Reaches Awaited Settlement With U.S. Merchants
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Mastercard Incorporated (MA - Free Report) recently struck a settlement deal with U.S. merchants, according to which it has agreed to lower its U.S. credit card interchange rates and provide more discretion to merchants on imposing surcharges on credit card transactions. If the agreement materializes, which is subject to the final nod of the Eastern District Court of New York, it will solve a nearly 20-year-long dispute that originated from a chain of complaints by merchants against MA, Visa Inc. (V - Free Report) and other financial institutions. V also agreed to the settlement terms.
The accusations, filed initially in 2005, mainly revolved around the companies’ interchange structure and point-of-sale acceptance rules, which resulted in the overcharging of merchants for accepting Mastercard and Visa-branded credit and debit cards.
Delving deeper into the settlement terms, the reduction in published and effective interchange rate applies to U.S.-issued consumer credit and commercial credit transactions across nationwide merchant locations. The lowered rates will continue for a period of five years. Additionally, the payment networks will offer greater flexibility and a wider array of options to merchants for imposing surcharges on credit card transactions.
Once the settlement receives the final approval, the abovementioned changes to the network rules are likely to be implemented in late 2024 or early 2025. The ulterior motive behind the recent move remains to infuse a higher degree of transparency and certainty within the merchants about the payment card acceptance programs. Meanwhile, the protection of consumers’ interests is also assured.
The agreement is also expected to benefit Mastercard as it will settle most of its unresolved U.S. merchant litigations, thus relieving it from expending significant resources on regulatory proceedings, litigation and legislative activity. Litigation provision expenses over the past few years have continued to escalate the total operating costs of the company and subsequently, act as a drag on MA’s bottom-line growth.
During 2023 and 2022, the company recorded pre-tax charges of $344 million and $133 million, respectively, concerning estimated changes in merchant claims opting out of the U.S. merchant class litigation.
The presence of a trusted partner like Mastercard, whose digital arm is built with the help of several collaborations and investments, infuses a sense of security and an enhanced payment experience for worldwide consumers and merchants of all sizes.
Shares of Mastercard have gained 34.6% in the past year compared with the industry’s 26% growth. MA currently carries a Zacks Rank #3 (Hold).
The bottom line of Duolingo outpaced estimates in each of the last four quarters, the average surprise being 111.47%. The Zacks Consensus Estimate for DUOL’s 2024 earnings is pegged at $1.38 per share, which increased nearly four-fold from the year-ago reported figure. The consensus estimate for revenues suggests growth of 36.5% from the year-ago reported number. The consensus mark for DUOL’s 2024 earnings has moved 48.4% north in the past 30 days.
PagSeguro Digital’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 10.12%. The Zacks Consensus Estimate for PAGS’ 2024 earnings indicates an improvement of 17.4% from the year-ago reported figure. The consensus estimate for revenues suggests growth of 2.4% from the year-ago reported number. The consensus mark for PAGS’ 2024 earnings has moved 5.8% north in the past 30 days.
Shares of Duolingo and PagSeguro Digital have gained 60.6% and 71.9%, respectively, in the past year.
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Mastercard (MA) Reaches Awaited Settlement With U.S. Merchants
Mastercard Incorporated (MA - Free Report) recently struck a settlement deal with U.S. merchants, according to which it has agreed to lower its U.S. credit card interchange rates and provide more discretion to merchants on imposing surcharges on credit card transactions. If the agreement materializes, which is subject to the final nod of the Eastern District Court of New York, it will solve a nearly 20-year-long dispute that originated from a chain of complaints by merchants against MA, Visa Inc. (V - Free Report) and other financial institutions. V also agreed to the settlement terms.
The accusations, filed initially in 2005, mainly revolved around the companies’ interchange structure and point-of-sale acceptance rules, which resulted in the overcharging of merchants for accepting Mastercard and Visa-branded credit and debit cards.
Delving deeper into the settlement terms, the reduction in published and effective interchange rate applies to U.S.-issued consumer credit and commercial credit transactions across nationwide merchant locations. The lowered rates will continue for a period of five years. Additionally, the payment networks will offer greater flexibility and a wider array of options to merchants for imposing surcharges on credit card transactions.
Once the settlement receives the final approval, the abovementioned changes to the network rules are likely to be implemented in late 2024 or early 2025. The ulterior motive behind the recent move remains to infuse a higher degree of transparency and certainty within the merchants about the payment card acceptance programs. Meanwhile, the protection of consumers’ interests is also assured.
The agreement is also expected to benefit Mastercard as it will settle most of its unresolved U.S. merchant litigations, thus relieving it from expending significant resources on regulatory proceedings, litigation and legislative activity. Litigation provision expenses over the past few years have continued to escalate the total operating costs of the company and subsequently, act as a drag on MA’s bottom-line growth.
During 2023 and 2022, the company recorded pre-tax charges of $344 million and $133 million, respectively, concerning estimated changes in merchant claims opting out of the U.S. merchant class litigation.
The presence of a trusted partner like Mastercard, whose digital arm is built with the help of several collaborations and investments, infuses a sense of security and an enhanced payment experience for worldwide consumers and merchants of all sizes.
Shares of Mastercard have gained 34.6% in the past year compared with the industry’s 26% growth. MA currently carries a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the Business Services space are Duolingo, Inc. (DUOL - Free Report) and PagSeguro Digital Ltd. (PAGS - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of Duolingo outpaced estimates in each of the last four quarters, the average surprise being 111.47%. The Zacks Consensus Estimate for DUOL’s 2024 earnings is pegged at $1.38 per share, which increased nearly four-fold from the year-ago reported figure. The consensus estimate for revenues suggests growth of 36.5% from the year-ago reported number. The consensus mark for DUOL’s 2024 earnings has moved 48.4% north in the past 30 days.
PagSeguro Digital’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 10.12%. The Zacks Consensus Estimate for PAGS’ 2024 earnings indicates an improvement of 17.4% from the year-ago reported figure. The consensus estimate for revenues suggests growth of 2.4% from the year-ago reported number. The consensus mark for PAGS’ 2024 earnings has moved 5.8% north in the past 30 days.
Shares of Duolingo and PagSeguro Digital have gained 60.6% and 71.9%, respectively, in the past year.