In this article, we will explore the 10 best digital currency and payments stocks to invest in.
The Digital Payment Revolution: Growth Trends and Insights
The digital currency and payments sector is rapidly evolving, driven by technological advancements and changing consumer expectations. Digital money continues to reshape how transactions are conducted, making them faster, cheaper, and more accessible. According to a report by The Business Research Company, the global digital payments market was valued at $115.93 billion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 9.3% during 2024-2028 to reach a value of $180.26 billion by the end of the forecast period.
The rise of e-commerce and technology-driven initiatives is significantly boosting the digital payments market. Consumers are increasingly choosing non-cash payment methods because they are easier and more convenient for transactions. This trend is expected to lead to a growth in low-cost payment terminals and methods like QR codes in the near future.
A major driver behind this shift is the younger generations, particularly millennials and Generation Z, who are quick to adopt digital payment services. Online banking has become a popular choice among young users, who demand personalized and flexible experiences. As businesses adapt to these expectations, enhancing customer experience has become crucial for success in the competitive digital payment landscape.
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The McKinsey Digital Payments Survey 2024 reveals that the use of digital payments is steadily increasing in both the United States and Europe. Approximately 9 in 10 consumers in these regions have made at least one digital payment in the past year, with the US reaching a record high of 92%. In the US, in-app and in-store digital payments are growing rapidly. In-app purchases now account for 60% of digital payment usage, up by 8 percentage points since 2019. Additionally, the adoption of digital wallets for in-store transactions has risen from 19% in 2019 to 28% in 2024. This shift represents a significant market, with around $10 trillion spent annually by consumers across the United States and Europe.
Notably, the survey also found that about one in five users often leave their physical wallets at home, opting for digital payment methods instead. In-store digital wallet usage is similar between the US and several European countries. This also includes traditionally cash-heavy nations like Germany and Italy, where about a quarter of respondents reported using digital wallets for in-store purchases in the past year. This trend indicates a broader acceptance of digital payments among consumers across various markets.
With this background in mind, let’s take a look at the 10 best digital currency and payments stocks to invest in.
A businesswoman using a digital tablet, making a payment using the company’s payment processing technology.
Methodology
To compile our list of the 10 best digital currency and payments stocks to invest in, we consulted various online resources and also reviewed our own rankings. This exercise provided us with a list of the best digital money stocks. From an initial pool of more than 20 digital currency and payments stocks, we focused on the top 10 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 10 best digital currency and payments stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Digital Currency and Payments Stocks To Invest In
10. Affirm Holdings Inc. (NASDAQ:AFRM)
Number of Hedge Fund Holders: 45
Affirm Holdings Inc. (NASDAQ:AFRM) is a leading financial technology firm specializing in buy now, pay later (BNPL) services. As one of the largest BNPL lenders in the US, the company offers flexible loan options. Affirm Holdings Inc. (NASDAQ:AFRM) also allows consumers to pay upfront for certain transactions, particularly with its Affirm Card debit card product.
In the first quarter of fiscal 2025, the company reported impressive growth, with total revenue reaching $698 million, a 41% increase year-over-year. This growth was driven by a 35% rise in Gross Merchandise Volume (GMV), which hit $7.6 billion. Notably, GMV from Affirm Holdings Inc.’s (NASDAQ:AFRM) top five merchants grew by 41%, indicating strong partnerships and increasing market share. The Direct-to-Consumer segment saw even more significant growth, with GMV rising 44% year over year to $2.1 billion. The Affirm Card alone generated $607 million in GMV, reflecting a 171% increase compared to the same quarter last year. The active cardholder count also surged by 19% quarter-over-quarter, surpassing 1.4 million.
Affirm Holdings Inc.’s (NASDAQ:AFRM) expansion strategy is noteworthy. In September 2024, the company announced that its buy now, pay later service has become available for Apple Pay users in the United States. Eligible users will be able to split their purchases into biweekly or monthly payments when checking out with Apple Pay on iPhones and iPads running iOS 18 or later. Additionally, on November 3, Affirm Holdings Inc. (NASDAQ:AFRM) expanded its services to the UK after processing over $75 billion in transactions across the US and Canada in the past five years. This launch aims to enhance the company’s reach and provide flexible payment options to a broader audience, contributing to its growing network of 50 million consumers and over 300,000 merchants worldwide.
Given its strong performance metrics and strategic initiatives, Affirm Holdings Inc. (NASDAQ:AFRM) presents a compelling investment opportunity in the digital currency and payments sector. AFRM is one of the best digital money stocks to invest in.
9. Ally Financial Inc. (NYSE:ALLY)
Number of Hedge Fund Holders: 56
Ally Financial Inc. (NYSE:ALLY) is a prominent player in the digital financial services sector, offering a wide range of products such as auto financing, banking, and insurance. The company has established itself as a leader with an all-digital bank model that caters to consumers, businesses, and automotive dealers.
In the third quarter of 2024, Ally Financial Inc. (NYSE:ALLY) in its Auto segment processed 3.6 million consumer applications and generated $9.4 billion in auto originations. Despite elevated retail auto net charge-offs of 2.24%, Ally Financial Inc.’s (NYSE:ALLY) proactive measures are expected to reduce losses over time, showcasing its commitment to risk management. The company’s Ally Bank continues to thrive, boasting $141 billion in retail deposits, with 92% being FDIC-insured. The bank has achieved 62 consecutive quarters of customer growth, now serving 3.3 million retail depositors. This stability enhances Ally Financial Inc.’s (NYSE:ALLY) position for margin expansion in the coming years.
Looking ahead, Ally Financial Inc. (NYSE:ALLY) is focused on diversifying its revenue streams, particularly within insurance and auto finance. The company anticipates generating $1.5 billion in written premiums this year, driven by new partnerships and synergies with its auto finance business. Additionally, Ally Financial Inc.’s (NYSE:ALLY) online vehicle auction platform, Smart Auction, is enhancing its monetization efforts. Given these fundamentals and strategic initiatives, Ally Financial Inc. (NYSE:ALLY) presents a compelling investment opportunity in the digital currency and payments sector.
