Digital Payments Rise Amid Coronavirus Crisis: Stocks in Focus

As the world adapts to the new normal caused by the outbreak of coronavirus, technology adoption is going to change in more ways than one. Since the virus transmits through contact, digital payments, either in the form of cards or e-wallets is becoming the norm so as to avoid the spread of Covid-19.

Although data security and privacy concerns and additional charges on making digital payment limited the demand for digital payment solutions, especially in emerging markets, the pandemic has become a key catalyst.

Per Statista, total transaction value in the Digital Payments segment is expected to see 15.3% year-over-year growth in 2020 with a 5.4% uptick in users. Total transaction value is expected to show a CAGR of 12% by 2023.

Technology innovation in digital payment solutions, increasing Internet penetration and usage of smartphones are major driving factors exerting positive influence on the growth of market. Additionally, demand for mobile Point-of-Sale (POS) and peer-to-peer payments is likely to increase in the near term.

Contactless Payments Gain Momentum

Change in consumer behavior, especially rising adoption of e-commerce, is expected to drive online payments volume. United States e-commerce spending grew 93% year over year in the month of May. In April and May, e-commerce as a share of total retail sales reached 22% in the United States and 33% in the United Kingdom — an unprecedented high, excluding auto, petrol and restaurants.

Additionally, shift to contactless money transfer for online shopping, transportation, movement of goods, for bills and utilities payments is gaining traction. Globally, seven in 10 consumers say the shift to digital payments will likely be permanent, and nearly half of consumers plan to go cash less, after the pandemic subsides, according to a Mastercard weekly survey launched on Apr 27.

Moreover, store operators and other merchants, utility providers and even banking organizations are opting for online payments over offline or contact payments.

On Jun 16, the American Gaming Associationcalled on regulators in gambling-allowed states to update their rules or laws to integrate cashless options for gamblers.

Markedly, companies in the card space like Visa, Mastercard, American Express and Citigroup C are likely to benefit due to the surge in contactless payments. In the United States, Citigroup saw an 84% increase in daily mobile check deposits in May.

Moreover, a tenfold surge in activity on Apple’s AAPL Apple Pay was witnessed as quarantined customers used digital and contactless tools to handle their financial activities.

Year to Date Performance

Facebook and Google Under the Spotlight

Facebook FB and Alphabet’s GOOGL Google Pay have been under limelight as contactless payments gain traction.

Facebook recently launched WhatsApp-based digital payments service for the messaging app’s 120 million users in Brazil, moving ahead with its plans to capitalize on emerging markets. The move comes after WhatsApp’s efforts to launch UPI payments service in India were held up by regulators, including the country’s central bank, for two years, despite a testing initiative. (Read more: Facebook Launches WhatsApp Digital Payment in Brazil)

This Zacks Rank #3 (Hold) company will prioritize introduction of the feature in four markets: Brazil, Mexico, Indonesia and India. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, Google is planning to turn its Google Pay app in the United States into a one-stop shopping platform.  This Zacks Rank #3 company’s employees have reportedly been working to persuade grocery stores, gas stations and restaurant chains to sign up for the plan.

Given the wide-scale adoption of Android smartphones, expanding international presence and partner base, Google Pay is expected to gain a competitive edge over its peers in the digital payments market.

PayPal & Square Gearing Up

PayPal PYPL enjoys solid momentum in peer-to-peer transfer on the back of its well-performing Venmo, which enables transfer of money between family and friends via mobile devices. Notably, the Venmo app processed more than $31 billion in first-quarter 2020, up 48% year over year. Venmo users can now pay at more than 2 million PayPal merchants across the United States.

Last week, this Zacks Rank #3 company said that it will roll out a permanent QR code feature in 28 markets including the United States. This will allow buyers to scan seller QR codes in order to pay for items in a touch-free manner using their PayPal wallets.

Square SQ, which also carries a Zacks Rank #3, is gaining traction on the back of its innovative product lines and strong adoption of its payments and POS services.

Moreover, Square is witnessing solid adoption of its peer-to-peer payment service, Cash App, thanks to an user-friendly interface.

All Eyes on Amazon & Apple

Apple Pay is performing well in the market on increasing clientele and partner base. The card is now accepted by retailers like Taco Bell and Target. The app is now available in more than 50 markets.

Further, the easy synchronization of Apple Pay with Apple Watch remains a major positive. Notably, Apple carries a Zacks Rank #3.

Meanwhile, Amazon AMZN is gaining traction on the back of its online payments processing service — Amazon Pay. The app enables users to make payments, perform shopping, pay bills, book flight and event tickets.

Further, this Zacks Rank #3 company’s strong cashback offerings and the huge customer base of its e-commerce platform boost the adoption rate of Amazon Pay.

5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.

See the 5 high-tech stocks now>>

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