Mastercard Incorporated is, by almost every important measure, Visa's smaller twin. The two businesses operate on the same fundamental architecture — a network of issuing banks on one side, merchant-acquiring banks on the other, and a small fee, measured in basis points, on every transaction that crosses between them. Neither business extends credit. Neither holds cardholder balances. Neither, in any meaningful operational sense, takes risk on the underlying transactions. They are toll booths. The difference, when you stand in either of the parking lots, is mostly that Visa's parking lot is twice the size.

Twice as large in network volume, that is. Roughly twice as large in revenue. Roughly twice as large in operating earnings. But — and this is the interesting part — only modestly larger in operating margin. Mastercard runs at a slightly leaner cost structure than Visa, in part because it has spent the last decade investing more aggressively in adjacent business lines (data services, cybersecurity, real-time payments). The result is that Mastercard's margin has been compressing, slowly, while Visa's has held steady or improved.

They are toll booths. The difference, when you stand in either of the parking lots, is mostly that Visa's parking lot is twice the size.

The protocol takes both businesses through the same eight steps. Owner Earnings: high. Growth: capped at twenty percent forward analyst consensus, which both companies routinely overshoot. Discount rate: no sector premium, because payment networks are infrastructure rather than technology in our taxonomy. Margin of safety: twenty-five percent. The output, in both cases, is an intrinsic value comfortably above the asking price. The Δ% on Mastercard, on most days, lands within a few percentage points of Visa's, which is what you would expect from two businesses doing essentially the same thing.

What we keep an eye on, between the two, is precisely the margin trajectory. Visa is, in our protocol, the more conservative buy — not because the business is better (it isn't, particularly), but because Visa is doing less of the experimental adjacent-business spending that has eaten into Mastercard's margins. If you believe the cybersecurity-and-data-services bet pays off — and there is a serious case to be made — Mastercard is the more interesting business of the two and probably the more interesting holding. If you don't believe it pays off, Visa is the cleaner play. The protocol does not pick between them. We are not picking between them. We are saying: both are roughly priced for value rather than growth, today, and both are wonderful businesses.

A reader with a longer memory will recognise this as the same observation the editors made about both companies' IPOs — Visa in 2008, Mastercard in 2006. Toll booths compounding at fifteen percent are not exactly rare, but they are uncommon enough that, when one is offered for sale on a public exchange, the patient owner notices. Mr. Market continues to ask reasonable prices for both. The Δ% would not get our attention if they were the only two businesses on the Tape. But across a screen of thirty names, they consistently rank in the top half. That is, in our reading, sufficient.

The honest comparison piece is not Visa-vs-Mastercard. It is the two-of-them versus the new payment-network entrants — the PayPals, the Blocks, the Adyens of the world. We will write that piece when Mr. Market gets bored of them. He is currently still excited.

— The editors