5 Stocks to Watch Amid Surging Demand for Digital Payments
As the pandemic halted in-store shopping, people resorted to shopping online and preferred digital or contactless payments as a safer method for transacting. Safety has become a priority among consumers around the world and businesses have been adopting contactless payment methods to meet the growing demand. Per the Back to Business Study report by Visa Inc. V, 48% of consumers said that they wouldn’t shop at a store unless it offered some form of contactless payment, as mentioned in a Vending Market Watch article.
In fact, a survey conducted by the National Retail Federation and Forrester in the United States last year found that 67% of the retailers surveyed were accepting some form of contactless payment. This included 58% of retailers that accept contactless cards that can be waved past or tapped on card readers compared to 40% in 2019, while 56% reported taking digital wallet payments on mobile phones, rising from 44% in 2019.
Apart from being contactless, digital payments offer other benefits which can ensure that their demand continues to accelerate even beyond the pandemic. Digital payments provide faster and hassle-free transactions. Consumers don’t have to carry cash with them and can also complete transactions via their smartphones. Merchants and financial institutions too offer certain discounts upon purchases as well as other offers, making it even more exciting for consumers. It also helps consumers to easily keep track of how much they are spending and where, as the details of the transactions are readily available.
Several forms of digital payments are available and while credit and debit cards have been popular choices, other methods like quick response (“QR”) code scanning are gaining traction. This is because consumers simply have to scan the merchant’s QR code to initiate the payment process, making it even more convenient. In fact, per a Juniper Research report, the number of QR code payments users is expected to exceed 2.2 billion in 2025, from 1.5 billion in 2020, and amount to 29% of mobile users worldwide.
Reflective of the positive developments that digital payments have been witnessing, the digital payments market is expected to grow. Per a report by ReportLinker, the digital payments market is expected to witness a CAGR of 13.7% from 2021 to 2026, as mentioned in a GlobeNewswire article.
5 Stocks to Watch
The popularity of digital payments is set to accelerate further, thanks to the myriad conveniences they offer. This seems then a good time to look at companies offering digital payment solutions that stand to benefit from this potential. We have selected five such stocks that carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apple Inc. AAPL offers Apple Card, a co-branded credit card; and Apple Pay, a cashless payment service. On Aug 19, the company announced that Apple Card, which is the only card issued by Goldman Sachs, ranked highest among the Midsize Credit Card segment in the J.D. Power 2021 U.S. Credit Card Satisfaction Study.
Shares of Apple have risen 9.9% year to date and it currently flaunts a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 7.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 70.4%.
Usio, Inc. USIO, together with its subsidiaries, provides integrated electronic payment processing services to merchants and businesses in the United States. The company offers various types of automated clearing house processing; and credit, prepaid card, and debit card-based processing services.
Shares of Zacks Rank #2 Usio have risen 125.1% year to date. The Zacks Consensus Estimate for its current-year earnings improved 55.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 82.6%.
EVERTEC, Inc. EVTC provides merchant acquiring services, which enable point of sales and e-commerce merchants to accept and process electronic methods of payment, such as debit, credit, prepaid, and electronic benefit transfer cards.
Shares of EVERTEC have risen 17.1% year to date. The Zacks Consensus Estimate for its current-year earnings increased 13.8% over the past 60 days. This Zacks Rank #2 company’s expected earnings growth rate for the current year is 27.5%.
Visa facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. On Apr 7, the company announced that it had processed one billion additional touch-free payments in Europe, within less than a year since contactless payment limits were increased across 29 countries in Europe due to the pandemic.
Shares of Visa have gained 7.1% over the past six months and it currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 3.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 15.5%.
Alphabet Inc.’s GOOGL Google offers Google Pay, a digital payment app where users can send or receive money with ease. The app also supports QR code scan payments.
Shares of this Zacks Rank #3 company have risen 60.1% year to date. The Zacks Consensus Estimate for its current-year earnings increased 13.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 73.8%.
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