In this article, we will take a look at the digital payments industry and then discuss the 10 best digital payments stocks to buy now.
Digital Payments Industry: An Analysis
It was the global pandemic that catalyzed the contactless ways of payment around the world. As physical stores shut down, digital payment methods became the norm with shoppers looking for a less personal and more digital interaction. According to a poll by the digital payment leader Mastercard, more than half of Americans opted for some form of contactless payment such as tap-to-go credit cards and mobile wallets amid COVID. The trend has continued and is here to stay since more than two in every three in-person transactions globally on Mastercard’s network were reported to be contactless in 2023.
McKinsey’s 2023 Digital Payments Consumer Survey reveals that online purchasing took the lead among all other kinds of digital payments among consumers. With the return of in-person shopping, using a device to pay at retail places by scanning a bar code with it or tapping it on a point-of-sale device, also known as in-store digital payments, has grown. Simultaneously, the in-app digital payments and peer-to-peer payments have risen since 2021. This reflects the already mainstream consumer digital payments which are and will continue to evolve.
The other market which tends to be highly addressable and promising is the B2B digital payments market with businesses looking for more ways to drive efficiency and engage in cross-border business transactions. This market was valued at $1.69 trillion in 2023 and is expected to grow at a compound annual growth rate of 9.38% from 2024 to 2033, as reported by Brainy Insights. Global Payments CEO, Cameron Bready, mentioned B2B payments as the next frontier for payments, with significant growth in the digitization of B2B payments. In an interview with CNBC, he emphasized this big opportunity by predicting the B2B market to be 3 to 4 times the size of the consumer market. According to him, this market remains highly fragmented and under-penetrated.
With that being said, let’s move to the 10 best digital payment stocks to buy now.
A customer making a purchase with a debit card at a store.
Our Methodology:
We first used a stock screener and mobile payments ETFs to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best digital payments stocks to buy now have been arranged in ascending order of their hedge fund holders as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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 Payments Stocks To Buy Now
10. Payoneer Global Inc. (NASDAQ:PAYO)
Number of Hedge Fund Holders: 35
Payoneer Global Inc. (NASDAQ:PAYO) is a leading global payments platform. The company caters to the payment challenges of freelancers, SMBs, marketplaces, and enterprises. Payoneer has created a financial system that connects the globe. The firm started off with the vision of democratizing access to global commerce for all kinds of businesses and has supported the growth of many small and medium businesses over the years.
Payoneer Global Inc. (NASDAQ:PAYO) is trusted by leading marketplaces including Upwork, Amazon, Adobe, and Google. The firm’s CEO John Caplan is trying to refocus the cross-border payments firm for small and mid-sized companies on the business-to-business market which offers a bigger opportunity. Payoneer Global Inc. (NASDAQ:PAYO) recently expanded into global workforce management services for SMBs through the acquisition of Skuad. This move will support Payoneer’s strategy of delivering a comprehensive and integrated financial stack for SMBs that operate on an international level.
The company is in an attractive spot as it moves through 2024. Recently, Payoneer closed another consecutive quarter of record revenue. During the year’s second quarter, the 22% volume growth since 2023 depicts the outperformance. The quarter was marked by a 40% year-over-year rise in B2B volume, a 15% year-over-year increase in marketplace volume, and a 192% year-over-year rise in merchant services (Checkout) volume.
With a solid momentum entering the year’s second quarter, the leading position as the partner of choice for SMBs with global operations, and an increasing focus on the $6 trillion cross-border B2B payments opportunity, Payoneer Global Inc. (NASDAQ:PAYO) ranks among the 10 best digital payment stocks to buy now. As of Q2, the stock is held by 35 hedge funds while Millennium Management is its most dominant shareholder.
9. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 35
StoneCo Ltd. (NASDAQ:STNE) is a Brazilian provider of financial technology solutions. The firm serves clients of all types that transact online, offline, or those with an omnichannel sales approach. It focuses on enabling its clients to conduct e-commerce and grow. This focus is a key differentiator that helps the firm retain these clients. The firm operates with the goal of becoming the best financial operating system for Brazilian merchants.
The superior client service, Tech-enabled distribution, and comprehensive merchant platform are some of the competitive advantages that make StoneCo Ltd. (NASDAQ:STNE) stand out. The strength of the business is evident from the fact that the top line and the bottom line have been growing over the past 3 years. In financial services, the firm is witnessing revenue growth with margin expansion. The profitability of the software business also remains stable on a recurring basis.
In payments, the firm continues to win in the MSMB (Micro and SMB clients) market by capturing more market share. Driven by consistent active client base growth and higher client monetization, financial services revenue rose by 10.6%. MSMB Card Total Payment Volume climbed 17.4% year-over-year. In banking, the company showed similar progress by reaching 2.7 million active banking clients and 6.5 billion reais in deposits. In the software business, the progress with cross-selling financial services to software clients is also commendable.
Based on the strong trajectory of results demonstrated through the year’s first half, StoneCo Ltd. (NASDAQ:STNE) is set to achieve its long-term goals. Also, the stock is trading at 10 times its forward earnings, a discount of 13% to the sector which deems it a cheap investment. It is held by 35 hedge funds, as of Q2 2024. Point72 Asset Management stands as the most dominant shareholder in the firm.