Top digital payments stocks to buy amidst e-commerce boom

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Updated: July 05, 2021 4:29 PM

Global digital payment sector holds tremendous growth potential with enhanced consumer faith over the previous year as consumers are obliged to make transition away from cash.

digital payments stocks, sector, payment companies, e-commerce boom, Square, Global PaymentsWhen technology is intuitively designed, it is more likely to have a lasting impact and uptake among new adopters.

The world had gone digital long back and the online medium has been a thriving platform for various transactions and payments. From shopping to buying almost anything on the web, online payments have seen tremendous increase on the back of an e-commerce boom. The lock down restrictions since the outbreak of Covid-19 has further acted as a boost to the revenues of digital payments companies. As per a recent note by GlobalData, “COVID-19 pandemic enables top payment companies to achieve improved top-lines based on upscaled transaction volumes.”

The COVID-19 pandemic accelerated the acceptance of digital payments across the globe in 2020, which rendered an improvement in the top-line performance of the majority of the top 20 public payment companies despite unprecedented economic slowdown, says GlobalData, a leading data and analytics company.

Both, total retail sales and total retail e-commerce sales seem to be growing. The Census Bureau of the Department of Commerce (US) announced the estimate of U.S. retail e-commerce sales for the first quarter of 2021, at $215.0 billion, an increase of 7.7 percent from the fourth quarter of 2020. Total retail sales for the first quarter of 2021 were estimated at $1,581.4 billion, an increase of 7.8 percent from the fourth quarter of 2020.

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Further, the first quarter 2021 e-commerce estimate increased 39.1 per cent from the first quarter of 2020 while total retail sales increased 16.8 per cent in the same period. E-commerce sales in the first quarter of 2021 accounted for 13.6 per cent of total sales.

According to GlobalData, “Over the previous year, the companies that recorded impressive top-line growths were Square, Global Payments, Fiserv, Adyen, PayPal, and Worldline, growing more than 15 per cent.”

Parth Vala, Company Profiles Analyst at GlobalData, comments: “Square’s growth was attributed to its exceptional growth in bitcoin revenue and revenue from subscription and related services. In addition, the company has been witnessing consistent growth in its transaction-based revenue over the past few years. Its gross payment volume reported a compound annual growth rate (CAGR) of 22.6 per cent over the past five years (2016-2020), reaching $112.3bn in 2020.”

Growth recorded by Global Payments, Fiserv, and Worldline were mostly inorganic, with additional revenue streams from acquired businesses, TSYS, First Data, and Ingenico, respectively.

PayPal’s payments transaction volume reached 15.4 billion in 2020, reflecting an increase of 24.2 per cent over 12.4 billion, a year ago. Its total payment volume reached $936.1bn from $711.9bn, representing a y-o-y growth rate of 31.5 per cent and 27 per cent CAGR over the past five years, which translated into overall revenue growth of 20.7 per cent.

Vala concludes: “Though the aggregate revenue growth of the top 20 payment companies was a nominal 2.72 per cent, it emphasizes the fact that the global digital payment sector holds tremendous growth potential with enhanced consumer faith over the previous year, albeit largely it was pandemic-forced as consumers were obliged to transition away from cash.”

Top 20 public payment companies by revenues 2020

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