Popular opinion in financial markets now has it that artificial intelligence will upend technology-fueled companies such as payment titans Visa (NYSE: V) and Mastercard (NYSE: MA).
Fears of catastrophe run rampant when new technologies assert themselves. That would include the wheel, steam engine, steel, railroads, computers, the Internet and data centers. But somehow many incumbent companies make out ok.
For example, computer/software/services giant International Business Machines (NYSE: IBM), founded in 1911, has withstood several technological revolutions in its time. And it helped create some of these revolutions, such as the introduction of mainframe and personal computers.
It wasn’t always a well-run company. One sign of its rigid culture was that it didn’t allow employees to wear non-white shirts until the early 1990s. That was a time when the company faced existential problems. But it withstood that and other storms. Its stock has climbed 1,578% over the past 50 years.
Getting back to Visa and Mastercard, there is speculation that AI marks their death-knell. Technologies like the blockchain and automated payment selection will leave them in the dust, some say. So far this year, Visa stock has dropped 12% and Mastercard 11%.
What might bury the companies … and what might not
The thinking is that “AI systems could route transactions directly between parties using stablecoins or other payment rails, potentially reducing the role of card networks in the payments chain and weakening their pricing power over time,” Investing.com explains.
But, “[according to Evercore], that outcome would require a long sequence of changes across the payments ecosystem, including merchant approval for automated purchasing, shifts in consumer funding behavior, new liability frameworks and broader acceptance of alternative payment rails.”
Companies at the top of their industries generally don’t go quietly into the night. Many are capable of rapid, fundamental change.
Indeed, Mastercard agreed in March to acquire London-based stablecoin infrastructure startup BVNK for up to $1.8 billion. And Visa, through partnerships with platforms like Bridge, is introducing stablecoin-linked cards to over 100 countries.
On the customer side, many are loyal to their credit cards, often because of reward programs that they like.
Near-term looks safe
Looking again at the views of Evercore, as cited by Investing.com, its analysts acknowledge that AI agents may make it easier for merchants or platforms to push payments toward cheaper entities than Visa and Mastercard. But any such transition would be gradual, thanks to the factors listed above.
Agentic commerce doesn’t mean credit cards will quickly go by the way side, Evercore says. Rather it will benefit companies that control the customer interface and will determine how payment options are optimized.
This could mean that Visa and Mastercard will be the ones providing tokenization, security, identity verification and settlement infrastructure, Evercore says. Thus they may help drive the future of digital commerce rather than get swallowed by it.
After all, their ability to adapt to new technology and create it themselves accounts for a large part of their success over the years.
Morningstar analyst Brett Horn likes both companies. “Despite the ongoing evolution of the payment industry, a wide moat surrounds the business, and [the two companies’] position in the global electronic payment infrastructure is essentially unassailable.”
If IBM can persevere, why can’t Visa and Mastercard?
The author owns shares of Mastercard.
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