4 Payment Stocks To Beat Q4 Earnings On Strong Holiday Sales
Zacks Investment Research | Jan 02, 2019 10:19PM ET
In the fourth quarter, payment companies are likely to witness an increase in card processing via their payments network on the back of a bumper holiday season.
According to Mastercard (NYSE:MA) SpendingPulse, which provides insights into overall retail spending trends across all payment types, including cash and check, holiday sales increased 5.1% to more than $850 billion in 2018. This marked the strongest growth in the last six years. Online shopping also witnessed substantial year-over-year gains of 19.1%.
The increase in retail spending is a major driving factor for the payment companies as more and more transactions are being paid for by online, mobile and via cards (debit and credit). Moreover, continuous rise in spending via e-commerce which generally involves the use of new age payments methods also bodes well for the payments industry.
Strong economic fundamentals and high consumer confidence molded this holiday season into a record-breaking one. Given the convenience, flexibility, security and speed that online sales provide, the same was up 16.6% ($123.73 billion) recorded in November and December.
The rapid shift in payments space from physical to electronic is evident by increasing adoption of online sales which has grown by 14.1%, 13.9% and 16.4% in 2015, 2016 and 2017, respectively.
Growing online sales leads to payments via electronic means such as mobile, cards, wearables and other connected devices, which bodes well for companies involved across the entire payment network.
All the companies in the payments chain will gain from increasing electronic payments. For instance, Visa (NYSE:V) and Mastercard earns processing fees each time their branded cards are swiped for making payments, other players such as Paypal earns transaction processing fees from payments made via its mobile application. Green Dot, a fintech company primarily in the prepaid debit card business, has witnessed increased use of its debit cards, which it issues under Visa and Mastercard brands.
American Express another major player in the payments industry generates a major portion of its revenues from discount revenue which is the fees charged to merchants for accepting American Express cards.
In a year’s time, the financial transaction Zacks Investment Research
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