Lately, war-on-cash stocks or companies that focus on digital payments have been some of the biggest gainers. After all, we are all heading toward a cashless society. Physical forms of payments, including cash and personal checks have lost importance, and paved the way for debit and credit cards, digital wallets and mobile commerce platforms.
E-commerce, in particular, has played a major role in increasing the demand for digital-based payments. Especially, in emerging economies, billions of customers have flocked toward digital payment platforms for money management issues. Visa CFO Vasant Prabhu said that “e-commerce is growing 5x as fast as face-to-face transactions. And in an e-commerce transaction, the propensity to use a Visa card is twice as high as a face-to-face transaction. So, something growing 5x as fast where your propensity to be used is twice what it might have been. That’s phenomenal.”
Another reason why customers are moving toward cashless payments is rise in mobile payments. This has revolutionized the way we spend, helping make contactless payment through smartphones. Needless to say, consumers nowadays are more willing than ever to use mobile devices to split a bill, pay back a friend or pay a babysitter.
So, how does mobile payment work? At a point-of-sale, especially at a supermarket checkout counter, smartphones use near field communication system to make payments without a debit/credit card. During purchases, the mobile device sends the consumer’s payment details through the Internet to the merchant’s website or app, thus, making payments less complex. With the trend catching up, the mobile payment market is widely expected to touch $4.5 trillion in 2023.
But war on cash has been occurring for several years. This is because it is cheaper to produce digital currency than paper. IRS can track digital income more easily compared to paper. The Fed too prefers digital currency, and most importantly corporates are making a lot of moolah from this global shift. With that in mind, here are the best performing war-on-cash stocks for 2020 –
Mastercard Incorporated MA provides transaction processing and other payment-related products and services in the United States and internationally. Mastercard’s over payment volumes are now up 14% over the last 12-month period, but it’s the international payment volumes that are up 16%. This is an important development as nearly 70% of Mastercard’s payment volumes come from outside the United States unlike its rival Visa Inc’s V 54%. In other words, Mastercard’s payment volumes have picked up when it mattered the most for the company.
Mastercard’s strategic acquisitions, alliances and technology upgrades, along with product-diversification and geographic-expansion initiatives also augur well for long-term growth. The company, currently, has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s expected earnings growth rate for the next year is 17.7%, higher than the Financial Transaction Services industry’s projected rise of 15.7%. The stock has outperformed the industry so far this year (+59.4% vs +46.3%).
Global Payments Inc. GPN provides payment technology and software solutions for card, electronic, check and digital-based payments. The company’s investments for future growth, a number of acquisitions and successfully refinancing its credit facilities bode well for the long term.
Global Payments reached a $21.5 billion merger agreement with rival Total System Services in May. The merger is expected to save the company $325 million annually in the next three years. At the same time, its operating cash flow has been increasing over the years, which provides room for investment.
Global Payments, currently, has a Zacks Rank #2. The company’s expected earnings growth rate for the next year is 22.5%, higher than the Financial Transaction Services industry’s projected rise of 15.7%. The stock has outperformed the industry so far this year (+77.3% vs +46.3%).
Square, Inc. SQ provides payment and point-of-sale solutions in the United States and internationally. Majority of its revenues comes from the fees collected whenever a person makes a purchase through its platform.
The company is also looking to expand its Square Cash app, which helps users send money. This popular app is currently posing stiff competition to rival PayPal Holdings, Inc.’s PYPL person-to-person payment app, Venmo. With around $27 billion market cap, Square is improving with its gross payment volume increasingly steadily.
The company, currently, has a Zacks Rank #3 (Hold). Its expected earnings growth rate for the next year is 23.4%, higher than the Internet - Software industry’s projected rise of 16.3%. The stock has outperformed the industry over the past two-year period (+84.1% vs +23.5%).
Investors should keep in mind that Alibaba Group Holding Limited BABA is a dominant tech player in the Chinese market. Also, the e-commerce company is fast becoming a major player in the mobile payment market space.
Its mobile payment app, Alipay, currently has a whopping 1 billion users and is used in 110 countries. China, in particular, has the world’s largest mobile payment market and Alipay processes more than half of the country’s mobile transactions.
The company, currently, has a Zacks Rank #3. Its expected earnings growth rate for the next year is 20.7%, higher than the Internet - Commerce industry’s projected rise of 13.8%. The stock has outperformed the industry so far this year (+57.2% vs +30.5%).
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