Fintech has emerged as a strong contender for the high-growth Silicon Valley companies, cementing itself in an innovation-based ecosystem. Moreover, the use of fintech, particularly in transaction and payments, has been pivotal in reducing costs for banks in America and improving their return on equity.
Consequently, to adapt to changing circumstances banks are switching to fintech and reshaping their payment methods. In an age where more than 70% of transactions are taking place online, traditional payment processing methods will prove to be disruptive to banking businesses across the world.
It goes without saying that cashless and easy payment options not only increase transaction frequency, but also help regional players expand in international markets. Fintech is connecting global economies and removing currency barricades. So, investing in fintech companies seems prudent as this sector keeps growing rapidly.
Why Invest in Digital Payment Stocks?
Financial technology encompasses mobile banking applications, direct deposit, person-to-person payments and AI-powered banking platforms. Per a U.S. Consumer Payment Study, approximately 63% individuals are using mobile banking apps this year compared with 46% in 2015. The study shows that two-thirds of consumers are clearly aware of in-app payments and familiar with digital payment.
This financial revolution has attracted several Wall Street blue-chip firms such as banking behemoths, asset management big shots and technology giants. These blue-chip firms are not only prime users of fintech, but also invest heavily in it to gain a share of this emerging market.
Since its inception in September 2016, the Global X Fintech ETF (FINX) has risen 88.4% compared to the S&P 500’s advance of nearly 44%. In fact, the Global X Fintech ETF is up 30.1% on a year-to-date basis, surpassing the S&P 500’s rise of 23.2%.
With changing consumption patterns and an urgency to go cashless, consumers prefer online and mobile payment platforms for shopping and paying bills, thereby reducing demand for cash and credit cards.
Mergers Boost Fintech Space
A spate of mergers and acquisitions in 2019 have led to big gains for fintech companies. On Sep 18, Global Payments Inc. GPN and Total System Services completed their $21.5 billion merger.
Another notable acquisition worth mentioning is Fiserv, Inc.’s FISV acquisition of First Data for $22 billion in January. Further, Fidelity National Information Services, Inc. FIS also acquired Worldpay in March for $35 billion.
What’s more, the United States flaunts the leading position in the fintech space. Per a Mordor Intelligence research report, the United States is among the leaders in fintech and accounted for 57% of the fintech market in 2018. Also, per a data from Accenture, investment in U.S. fintech companies has surged to $12.7 billion through the first two quarters of 2019.
Top 4 Picks
Given such developments in the fintech space and the high scope of growth that it offers, investing in these digital money transaction stocks would prove to be judicious. These four stocks have surpassed the Financial Transaction Services industry’s current-year projected rally of 9.2% and flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Global Payments is a publicly traded company that provides payment technology and software solutions for card, electronic, check and digital-based payments. The company’s expected earnings growth rate for the current year is 18.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. Global Payments flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mastercard Incorporated MA is a publicly traded technology company that provides transaction processing and other payment-related products and services. The company’s expected earnings growth rate for the current year is 18.5%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days. Mastercard carries a Zacks Rank #2.
Fiservis a publicly traded company that provides electronic bill payment and presentment services via its Internet and mobile banking software. The company’s expected earnings growth rate for the current year is 27.4%. The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the past 60 days. Fiserv carries a Zacks Rank #2.
FleetCor Technologies, Inc. FLT is a publicly traded company that offers fuel payment solutions to businesses and government entities that operate vehicle fleet. The company’s expected earnings growth rate for the current year is 11.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. FleetCor carries a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report
Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report
Fiserv, Inc. (FISV) : Free Stock Analysis Report
Mastercard Incorporated (MA) : Free Stock Analysis Report
Global Payments Inc. (GPN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research