43 - Investing in Credit Card Companies (V, MA, AXP, DFS)

Mental Models discussed in this podcast: Credit Rent-Seeking Networking Effects Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.  Support the Podcast on Patreon This is a podcast supported by listeners like you. If you'd like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron. You can find out more information by listening to episode 11 of this podcast. Show Outline: Credit Card Company Investing The full show notes for this episode are available at https://www.diyinvesting.org/Episode43 Four Major Credit Card Companies Visa (V) - payment processor Mastercard (MA) - payment processor American Express (AXP) - payment processor and bank (high-end focus) Discover Financial (DFS) - payment processor and bank The Business Model of Credit Card Companies Take a cut of all transactions on the payment network Credit risk vs no credit risk Payment processor Extremely valuable service to the marketplace Quality of the business: Extremely high for Visa and Mastercard Quite high for American Express and Discover as well Automatically inflation-adjusted sales growth Potential Threats Overvaluation (particularly for Visa and Mastercard) New payment mechanisms such as digital currency like bitcoin A resurgence in cash (unlikely) Summary Investing in credit card companies is an extremely attractive proposition. They are some of the highest quality companies in the world with clear inflation-adjusted growth. References https://en.wikipedia.org/wiki/Card_scheme