Posted by Kevin

Many of you that know me know that investing is one of my hobbies.  I am a self taught stock and options trader, and I am constantly looking for new investment opportunities.  There is an article in today’s Times Free Press entitled Debit Card Trend Rising, which prompted me to write this quick post.  In summary, the article details how the overall use of ATMs and written checks is trending downward, and is being replaced by debit card use.

Chattanooga President of Regions Bank, Michael Mathis, said use of his company’s 78 ATMs is down over the past year.  President of Cornerstone Bank, Frank Hughes, said his company has noticed a sharp decline in checks being processed.  The bank is on track to process 13% fewer checks in 2008 than they did in 2007.

This all means one thing - people are using their debit cards.  Who is the largest beneficiary of this trend?  I’m really not sure because I’m not expert, but I can say with certainty that Visa and Mastercard are positioned well for the continued rise in plastic usage.

I also own a small business, and each time someone pays with a credit card or debit card, I am charged a fee of anywhere between 2% and 3.5%.  Let’s put it this way, Mastercard made $4 Billion in 2007.  Their net profit was $1 Billion.  That’s darn good margins after expenses.  Visa’s income statement is a little harder to get ahold of because they just went public this year, but they have even more market share than Mastercard.

The bottom line - these companies are positioned well in the long run.  The current economic conditions might slow their uptrend, but these two companies are ones that I will have in my long term portfolio.  Everything is going digital, and consumers paying for their stuff is no exception.

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