Is Payment going to be a stable sector?

Major companies are still achieving massive growth

Payments is proving to be a stable sector with major companies achieving growth. Visa is a longtime, established market leader that still enjoys strong growth prospects. Despite the ongoing evolution of the payment industry, Morningstar reports that a wide moat surrounds the business and that Visa’s position .. is essentially unassailable. .. The shift" to "electronic payments has driven Visa’s growth historically", this is "to continue for the foreseeable future. … emerging markets will offer long-term growth even as growth in developed markets slows. Network effects "explains why a small number of networks have come to dominate electronic payments".. leading to "cost advantage strong enough to lead to a wide moat.

Similarly, Mastercard has multiple characteristics that should draw investors’ attention. Despite the evolution in the payment space analysts think a wide moat surrounds the business and view Mastercard’s position .. as essentially unassailable. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run, .. emerging markets could offer a further leg of growth even as growth in developed markets starts to slow. Finally, .. the company is relatively agnostic to smaller shifts in the electronic payment space, as it earns fees regardless of whether payment is credit, debit, or mobile.

PayPal’s development of a network early in the evolution of e-commerce allowed the company to build and maintain an enviable competitive position. Historically, PayPal’s growth had been driven by the ongoing shift toward electronic payments & the rise of e-commerce. However, the company is now seeing some headwinds in the near term as the positives from the pandemic reverse and new competition arises. Management has attempted to combat the pressure .. with a greater focus on cost control and product innovation .. this will likely take some time to see results".

American Express has enjoyed several years of accelerated growth as the company benefited from a recovery in travel and entertainment spending while growing momentum with younger demographics drove record new card acquisitions". This "has also supported significant loan growth, with net interest income increasing >69% from 2021 to 2023. Amex still generates >75% of its revenue through noninterest income, with its largest source of revenue being the discount rate. .. So far, spending has remained surprisingly resilient." This is a point to monitor. "While the company has become more diversified, T&E spending still accounted for 25% of total billed volume in 2023. Commercial card business (worth ~23% of 2023 volume), has shown more signs of pressure, with spending volume growth falling in 2024.

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