ALREADY Since the introduction of the Diners Club Card in 1953 – the world’s first credit card – the United States has been at the forefront of developing innovative payment methods for consumers.
Fast forward to today, and the big area of growth is mobile electronic payment. The ubiquitous smartphone has changed the way today’s younger generations of consumers want to shop, and once again, American businesses have been at the forefront of enabling them to do just that.
Add to that the advent of cryptocurrencies, and it’s clear we’re in the throes of another 2020s revolution, with transitions to renewable energy and electric vehicles.
Electronic payment company stocks offer distinct advantages to investors seeking exposure to the financial sector.
Growth tends to be much stronger than it is for traditional banking activities. For example, the American giant Visa increased its revenue by 25% in the first quarter of this year compared to the same period in 2021.1.
Second, e-payment providers can reach consumers in developing countries, where traditional banking services were unavailable but where affordable smartphones have made big inroads.
As in many other areas of life, the pandemic has accelerated change as shoppers moved online and businesses went to great lengths to promote their digital platforms as the preferred method of payment. Now, e-payment providers look set to get a boost thanks to a resumption in travel around the world.
In May this year, Vantage Market Research estimated that the global mobile payments market will grow at a compound annual growth rate of 24% over the next six years, reaching US$6.3 trillion by 2028.2.
PayPal is a big hitter in mobile payments, especially since its recent deal with Amazon (remember Amazon’s spat with Visa last year over fees?). Amazon customers in the US will now be able to make mobile purchases using PayPal’s Venmo digital wallet.
PayPal is also now offered as a payment option to customers of Walmart, the world’s largest company by revenue.3.
Meanwhile, Mastercard and Visa are alike benefiting from the proliferation of mobile payments, as well as the growth of contactless card transactions. Mastercard reports nearly half of its in-person transactions worldwide are now contactless4.
Mastercard’s installment payments – introduced last September – offer consumers the option to choose buy-it-now and pay-later offers at checkout and promise to be an additional source of revenue growth.
Credit card issuer American Express has not been idle either, having entered the mobile payment arena with Amex Pay. This company’s relatively affluent clientele tends to cushion it from some of the effects of economic downturns. Revenue grew 29% in the first three months of 2022 as cardholders spent 35% more5.
Conversely, it has been a difficult year so far for cryptocurrency platform Coinbase, due to sharp declines in cryptocurrencies and a concomitant decline in trading volumes. However, it remains America’s largest crypto exchange, and mobile wallet app Coinbase appears to be well positioned to benefit from the likely widespread adoption of digital currencies later this decade.
1 Visa, 26.04.22
2 Vantage Market Research, 04.05.22
3 Fortune 500, 05.23.22
4 PYMNTS.com, 01.27.22
5 American Express, 22.04.22