Following huge growth in the digital payment sector this year, 2021 is the time to finally invest in the new future of money management.
Dec. 29, 2020
We have known for a few years that money management would turn digital, and that time seems to have arrived. With the pandemic effectively reducing our willingness to take objects out of people’s hands, cash has, in the space of a year, become a thing to avoid. Card payments are much more common, whilst apps that allow you to pay with your phone or smartwatch have soared in popularity.
Many investors have already ‘banked’ on the future of digital payments, but if you haven’t yet made that leap, now is the time to do so. With that in mind, we have 3 top payment apps for you to invest in during the course of 2021.
Paypal
PayPal (NASDAQ: PYPL) is undisputably the digital payments leader, so it makes sense that we would start with this one. In its recent Q3 earnings, CEO Daniel Schulman stated that this was one of the strongest quarters in PayPal history. Its report showed adjusted earnings per share of $1.07 with a revenue of $5.5 billion — topping experts estimates of $0.94 per share and $5.4 billion in revenue. Additionally, Q3 saw a 4% increase in the number of active accounts to 361 million.
PayPal’s impressive quarter was no doubt boosted by the rising trend of e-commerce over the past few years and now more than ever during the pandemic. Unfortunately, PayPal’s predictions for Q4 show a slowdown in adjusted earnings growth for the next quarter at 17%, despite its growth of 41% in Q3. This indicates that the e-commerce sector might now be saturated and future growth will mostly come from its focus on app-based payment methods.
Paypal owns Venmo, Xoom, and iZettle amongst other financial service companies. Venmo and iZettle are major competitors to Square (NYSE: SQ), particularly as Venmo will soon also offer Cryptocurrency options, including Bitcoin — something which Square has recently implemented. The stock is a worthy investment for any newbie in this sector.
Square
Square is a top competitor to Paypal as it has exploded in popularity throughout 2020. In particular, its ‘Cash App’ has tapped into a niche of people who would rather not use a bank account by allowing app users to receive government stimulus checks. Square’s Q2 and Q3 results evidenced this particularly well with Q2 reporting a net income growth of 64% YoY to $1.92 billion; whilst in Q3 it shot up even further to $3 billion with an increase of 140% YoY.
Cash App launched its stock brokerage service in 2019 and since then over 2.5 million people have bought stock through the platform. The app also generated $385 million in gross profit, which is triple that of Q3 2019, showing that many people switching to Square’s user-friendly service to manage their money.
Furthermore, Square has a double-sided ecosystem. The company not only provides a way for consumers to control their money but also gives merchants the infrastructure to accept payments — including hardware such as card readers that are easily plugged into a tablet or computer.
Overall, this company is in direct competition with behemoth PayPal in many aspects, but PayPal might be reaching the end of its hypergrowth stage, whilst Square is still growing at pace.
StoneCo
StoneCo (NYSE: STNE) is often forgotten by many investors looking into this sector and you can understand why; it operates mainly in Brazil, and it is overshadowed by the likes of PayPal, Stripe, and Square. Indeed, it is not a company that the average North American Joe would be aware of, but in Brazil, it is a company that is helping bring about a cultural change in the way that people deal with their finances.
Brazil has several geographic, social, and political factors that prevent a large portion of its population from using traditional banks. In 2019 some 97% of Brazilians used a smartphone to access the internet with an average of 10 hours on the internet per day, this is a prime market for Cash Apps like that of StoneCo and its rival PagSeguro.
Whilst it is estimated that Brazil has some 300+ fintech firms operating in the country, this country has huge growth potential for enterprising firms that allow people to control their money. Despite the Pandemic, which hit Brazil particularly hard, StoneCo’s recent earnings showed a 2% increase in revenue to $173 million, beating expert estimates by $59 million. StoneCo is a great option for an enterprising investor in 2021.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.