Visa and Mastercard: The Mortgage Brokers of the Credit Card Industry

seeking alpha ^ | 4/12/08 | ma

[Flavius]

There is definitely a shift from cash to credit cards worldwide, just as there was a shift from renting to home ownership based on the wide availability of mortgages, but is only a matter of time before this comes to a screeching halt.

Visa (V) and MasterCard (MA) get paid a fee which is equal to a percentage of each transaction, and have no credit risk. Mortgage brokers have no direct credit risk either and they get an upfront fee when the transaction closes. If a borrower defaults, mortgage brokers do not lose a penny. The losers are those who bought the securitized mortgages. Mortgage brokers were doing great until borrowers began to default. The rating agencies downgraded the debt, and now, it is virtually impossible to securitize pools of mortgages. There are still plenty of houses for sale, but the number of transactions has plummeted, and the unemployment rate among mortgage brokers has skyrocketed.

[Flavius]

World finance leaders tackle bank reform

AP Photo: U.S. Treasury Secretary Henry M. Paulson shake hands with Finance Minister of Germany Peer Steinbruck...

Good times

[mylife]

Visa/MC

[the invisib1e hand]

not quite sure I understand why VISA and MC "have no credit risk," unless he's referring to the securitizing of of their receivables (recovering asap what they have paid to merchants).

The much-ballyhooed IPO of MC is of interest insofar as an IPO of a long-established franchise is rarely a bullish a sign, especially when the cost of money is so low.

[DeLaine]

ping

[the invisib1e hand]

s/b “IPO of VISA”

[Flavius]

you did see their stock right

[shove_it]

Bank of America: “No SSN, no problemo. Get a BofA checking account and a Visa card.”

[Flavius]

well why not, all they cared was the commission

the bailouts are the realm of the joey taxpayer

[Gorzaloon]

If an entity cannot make it with a piece of each sale, merchant fees, etc, and with default rates in the 30% region, plus the "Ooops, haha, the mail was slow again" fees, it will be sweet to see some of these people leap from windows and explode on the sidewalk.

But just as in the SubPrime thing, there is plenty of blame to go around. Most of us at one time or another have gotten stuck in the grocery line as the shopper ahead has tried one maxed-out card after another.

[mylife]

with default rates in the 30% region, plus the "Ooops, haha, the mail was slow again" fees, it will be sweet to see some of these people leap from windows and explode on the sidewalk.

Ditto's

[pnh102]

Of course there is no risk to Visa or Mastercard. If there are too many credit card defaults, they will simply lobby for a taxpayer-backed bailout like so many other banks and investment houses have receivied.

[mylife]

I cant believe I actually do business with these Aholes.
I hate BOA. 30 years a go I swore I would never bank with them again, then Bam! they acquired my bank and here they are again like a bad penny.

This thread is just the kick I need to divest myself of their grubby paws

[Flavius]

yes its grand to print monies

[the invisib1e hand]

you did see my correction, right?

[mylife]

capitol one can kiss my ass too!

They bought out my car loan from Hibernia, and started in right away with shennanigins.

I paid them off last month. Bahh! Whats in your wallet?

[yoe]

Another view is the one of the lazy shopper who hates the malls etc. and would rather catalog shop using their plastic. Those days are coming to an end also with the cost of shipping and handling. There are no bargains when you have to ship...and don’t blame it on the cost of fuel...this S&H cost has been steadily climbing for years – it use to be by weight, now it is what you spent on an item…a scarf you paid $75.00 for and weighs 2 oz, costs $6.00 or more to ship. Everyone will lose when the lazy shopper stops being lazy and shops at home to save on the S&H which will more than pay for the gas to the mall.

[Flavius]

nope

missed it

the only caviat is that V has 60% of the market share

so unless the whole consumer debt collapses which it should

it will be the same smoke screen

as in mortgages depends who ends up holding the bag

at very least we know who pays for crashes the credit worthy taxpayer Joe

[PapaBear3625]

not quite sure I understand why VISA and MC "have no credit risk," unless he's referring to the securitizing of of their receivables (recovering asap what they have paid to merchants).

Visa and MC do not extend credit. They process transactions and charge transaction fees. The bank through which the card is issued is the entity which is extending credit. If you don't pay your balance, it's the bank which is on the hook.

[mylife]

Discover.

Here is a cute company. My ex opened a discover account in my name without my knowledge. (thats legal in some states)

During the course of discourse.. I called Discover and told them to close the account to prevent "further activity"

They wouldnt close the account till all debts were paid.

Bahhh! Discover this...

But I aint bitter L0l

[the invisib1e hand]

Of course, thank you. A freaking cash cow, no? Their primary risk is of fraud, right?