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EVER since the arrival of the Diners Club card in 1953 – the world’s first credit card – the US has been at the forefront of developing innovative ways for consumers to pay.
Fast forward to today, and the big growth area is mobile e-payments. The ubiquitous smartphone has changed the way today’s younger generations of consumers want to shop and, once again, American companies have been at the forefront of enabling them to do so.
Add to this the advent of cryptocurrencies, and it’s clear that we are in the throes of another 2020s revolution, along with transitions to renewable energies and electric vehicles.
Shares in e-payments companies offer distinct advantages for investors aiming to gain an exposure to the financial industry.
Growth tends to be much stronger than it is for traditional banking activities. For example, the US giant Visa grew its revenues by 25% in the first quarter of this year compared with the same period in 20211.
Secondly, e-payments providers can reach out to consumers in developing countries, where traditional banking services have been unavailable but affordable smartphones have made big inroads.
As in many other walks of life, the pandemic accelerated change, as shoppers moved online and businesses went all out to promote their digital platforms as the preferred method of payment. Now, e-payments providers look set to receive a boost from a pickup in worldwide travel.
In May this year, Vantage Market Research estimated 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 20282.
PayPal is a big hitter in mobile payments, all the more so 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 complete their mobile purchases using PayPal’s Venmo digital wallet.
PayPal is also now being offered as a payment option to customers of Walmart, the world’s largest company by revenue3.
Meanwhile, Mastercard and Visa are similarly benefitting from the proliferation of mobile payments, as well as growth in contactless card transactions. Mastercard reports that nearly a half of its in-person transactions globally are now contactless4.
Mastercard Installments – introduced last September – gives consumers the option of choosing buy-now-pay-later offers at the point of checkout and promises to be a further source of revenue growth.
The credit card issuer American Express hasn’t been standing still either, having entered the mobile payments arena with Amex Pay. This company’s relatively wealthy customer base tends to help cushion it from some of the effects of economic slowdowns. Revenues grew 29% in the first three months of 2022 as card members spent 35% more5.
Conversely, it’s been a tough year so far for the cryptocurrency platform Coinbase, owing to sharp falls in cryptocurrencies and an attendant drop in trading volumes. However, it remains America’s largest crypto exchange and the Coinbase wallet mobile app looks to be well positioned to tap into the likely mainstream adoption of digital currencies later this decade.
1 Visa, 26.04.22
2 Vantage Market Research, 04.05.22
3 Fortune 500, 23.05.22
4 PYMNTS.com, 27.01.22
5 American Express, 22.04.22
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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