Boom In Digital Payments: Here Are The Stocks To Bet On

Credit Suisse analyzes a sector Big Tech is in no hurry to get into and expresses a preference for international merchant acquirers and processors, including PayPal Holdings Inc. PYPL.

The payments business exploits secular growth trends, starting with the ongoing trend towards detachment from cash, which has resulted in a strong digital payments growth over the last decade, according to a 2020 McKinsey report. The structural growth of the payments market is clearly visible in network companies and for processor/merchant acquirers. Aside from moving money, innovations such as NFC cards for proximity use, peer-to-peer (P2P) feature and push payments support the ecosystem.

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An E-Commerce Accelerated Trend: Samuel Traub, Equity Research Analyst - Banks/Insurance at Credit Suisse, pointed out that the e-commerce secular trend is also growing fast, pushing digital payments activities and creating new needs. Both incumbent and newcomer operators have developed capabilities in remote digital payments, with PayPal leading the way in online payments. On the customer side, innovative solutions have also emerged such as digital wallets and P2P payment apps, reflecting the preference for convenience and speed, made possible by smartphone penetration.

Big Tech Hesitates To Get In: The Credit Suisse analyst noted that big tech names like Apple Inc AAPL, Facebook Inc. FB, Alphabet Inc. GOOGL GOOG and Amazon.com Inc. AMZN have been making waves the industry for some time now, taking advantage of the user base size and also aiming to create a connection among merchants in order to facilitate consumer-to-business payments. However, for the time being, Big Tech hesitates to enter a heavily regulated industry and prefer to partner with credit cards and banks, even though they may use their payment capabilities as a backdoor to build a banking-as-a-service (BaaS) platform in the future.

Investment Names And Ideas: Having said that, despite generally lofty valuations, Credit Suisse sees attractive investment opportunities in the larger global card networks - with a preference for Visa Inc. V - but also considers digital-enabled merchant acquirers and processors with a broad range of products and international experience such as Adyen ADYEY, PayPal, Fiserv Inc. FISV, Square Inc. SQ and Global Payments Inc. GPN.

This article originally appeared on Financialounge.com and was translated from Italian to English. It does not represent the opinion of Benzinga and has not been edited.