Fisher: The key thing to know is that Mastercard and Visa provide the network. They don't actually issue the card; they don't take the credit risk. They're simply providing the rails, the connections between the banks who are issuing the cards and the merchants who accept them on the other side. They have so many people who have signed up over the last 60 years, so many customers who have their cards, so many retailers who accept their card, so many banks who issue their cards that they have this network that's hard to supplant.
They have returns on capital and margins which are incredibly high. They grow as the overall economy grows and as people shift their consumption away from using cash to using credit cards. So there's just an underlying growth driver with enormous profitability for these businesses.
In the last couple of years, there's been more noise around new entrants in the payments area, creating concern in the marketplace that Visa and Mastercard are going to be disrupted. We’ve lived through these cycles before. Competitors have come in over time—PayPal, Apple Pay—with the idea that they were going to supplant the Visa/Mastercard network system.
But then they realize they're never going to be able to do it, that they’re better off just using the existing Visa/Mastercard infrastructure. So they end up basically being another customer for Visa/Mastercard. We've seen this cycle over and over again.
When these stocks were weak last year around these concerns about payment competition, we took that as an opportunity to add to Visa, which we already owned, then started a position in Mastercard for the same reason.