Morgan Stanley reports that market perception of Mastercard and Visa has improved following a notable political setback for the Credit Card Competition Act (CCCA), a development the bank says eases a primary source of regulatory uncertainty that had kept some investors cautious.
What changed - Analyst James Faucette wrote in a note to clients on Tuesday that a Politico report indicating Senator Roger Marshall “agreed not to offer a credit card amendment” during a recent Senate Agriculture Committee markup reduces the likelihood that the CCCA will be attached to moving legislation. Morgan Stanley said that many investors had been monitoring "headline risk around the CCCA," and had chosen to wait until the threat of attachment appeared smaller.
Faucette said the latest political signal should "assuage near-term fears among investors about the likelihood of the CCCA being successfully attached, which makes the networks easier to buy." The bank pointed out that the CCCA had long been viewed as unlikely to move forward because it forces Congress to make a difficult choice between powerful stakeholders, including banks and major retailers.
Morgan Stanley also interpreted the Politico report as evidence that the tactic of attaching the CCCA to an unrelated bill was unsuccessful in this instance, and noted that this outcome is similar to past attempts to secure passage through attachment to other legislation.
Downside analysis remains bounded - Even under a downside scenario in which the bill were to pass, Faucette expects the financial effect on both Visa and Mastercard to be limited. The bank's scenario analysis assumed a shift of 10% of U.S. credit volumes to alternative networks coupled with approximately "25% price pressure on US credit fees." Under those assumptions the estimated revenue impact is about a "3.5% 2026E revenue impact for Visa, and ~2.5% impact to Mastercard."
Faucette added that competitive changes would likely evolve gradually, giving both networks time to renegotiate pricing and adjust costs to defend volumes and revenues.
Implications for investors and markets - The removal of an immediate attachment threat reduces headline-driven volatility risk for the two major payment networks, which may make them more attractive to investors who had been waiting for clarity on regulatory outcomes. The analysis from Morgan Stanley frames the CCCA, even in a passage scenario, as a manageable shock to revenue rather than an existential threat, and highlights the capacity of Visa and Mastercard to adapt over time through pricing and cost adjustments.
Bottom line - The recent political development cited by Morgan Stanley reduces an important near-term regulatory risk for Visa and Mastercard and, according to the bank's modeling, leaves both companies with limited projected revenue exposure even under adverse assumed scenarios.