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.
8. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 59
Block, Inc. (NYSE:SQ) is a technology company focused on financial services. It is made up of Square, Cash App, Spiral, TIDAL, and TBD, all of which help people navigate the barriers to accessing the economy. Square offers an integrated ecosystem of commerce solutions, business software, and banking services for sellers to grow their business while Cash App allows sending, spending, or investing money in stocks or bitcoin. Spiral advances the use of Bitcoin by building and funding free, open-source projects whereas TIDAL is a platform for musicians and their fans. TBD eases access to Bitcoin and other blockchain technologies.
The firm’s two primary ecosystems Square and Cash App remain its core strengths. While Square was initially introduced to help sellers accept card payments, it now offers more than 30 distinct products and services to help them grow their businesses. Block has driven continued and sustained long-term growth by adding new sellers efficiently and cross-selling its products and services. In the year ended December 31, 2023, over 4 million sellers used the Square ecosystem to make 4 billion individual sales transactions totaling $209.6 billion of Square Gross Payment Volume. Simultaneously, Cash App recorded 56 million monthly transacting activities across the US and the U.K., as of December.
Block, Inc. (NYSE:SQ) recently delivered a strong second quarter with its gross profit going up 20% year-over-year. Square gross profit increased 15% year-over-year while Cash App’s gross profit climbed 23% year-over-year. For the 12 months ending in June 2024, Block had $1.43 billion in adjusted free cash flow, almost doubling from the preceding year.
The strength of the primary business segments, a strong financial performance, the ability to generate substantial free cash, and growth potential underscore the importance of Block, Inc. (NYSE:SQ) as a promising digital payments stock. Block has 59 hedge fund holders, as of Q2 2024. Catherine D. Wood’s ARK Investment Management was the leading shareholder among these hedge funds.
7. Global Payments Inc. (NYSE:GPN)
Number of Hedge Fund Holders: 66
Global Payments Inc. (NYSE:GPN) powers commerce for businesses globally by facilitating simple, fast, and secure payments. It delivers seamless payments for every business, leading software for specific industries, single-source employer solutions, and better processes for buyers and suppliers. The firm is headquartered in Georgia and has 27,000 team members globally. Global Payments has a powerful ecosystem of brands across various verticals, including globalpayments, Heartland, greatergiving, AdvancedMD, ECSI, and touchnet among others.
Global Payments Inc. (NYSE:GPN) serves as a global powerhouse and has a reach extending across North America, Europe, Asia Pacific, and Latin America. The company claims to lead the industry in innovation, scale, and service. It has successfully built a worldwide commerce ecosystem comprising 4.6 million merchant accounts, 4,000 tech partners, 1500 financial institutions, and over 100 industries. Global Payments remains diversified in terms of geography, vertical markets, and revenue streams to navigate the uncertain macro environment.
With six decades of innovation, the company has been shaping the world of payments. While the firm was first to market with a multi-bank balance reporting system in the 1970s, it served as the early adopter of POS authorization terminals in the 1980s. It launched a next-generation transaction platform for card acceptance in the 2000s. By the 2020s, Global Payments evolved to become a part of the Fortune 500, expanded B2B, and got recognized as the official commerce technology provider of Mercedez-Benz Stadium, State Farm Arena, and Truist Park.
As the worldwide partner of choice for commerce solutions, Global Payments Inc. (NYSE:GPN) continues to deliver results. The company ended the fiscal second quarter of 2024 with high single-digit adjusted net revenue growth and double-digit adjusted earnings per share growth. Additionally, the firm is focusing on simplifying its business and streamlining its operations to drive sustainable growth in the future.
Over the years, Global Payments has positioned itself well in the highly innovative and competitive payments technology industry. In August, the firm appointed Robert Bob Cortopassi as its new president. Under the new growth-oriented leader who has a solid 12-year tenure at the company, the firm is poised to grow. As of Q2, it is held by 66 hedge funds thereby ranking on our list of the best digital payment stocks to buy now. Pzena Investment Management is the largest shareholder in the company.
6. Discover Financial Services (NYSE:DFS)
Number of Hedge Fund Holders: 68
Discover Financial Services (NYSE:DFS) is a digital banking and payment services company. Discover Global Network is the global payments brand of the company which offers network services across the payments ecosystem and facilitates billions in volume annually. To facilitate a seamless payment experience, this brand provides cardholders with global acceptance and cash access. Through its banking business, the firm provides personal loans, home loans, checking and savings accounts, and certificates of deposit.
With 70 million merchant acceptance points in over 200 countries and territories, Discover Financial Services (NYSE:DFS) has successfully built a rare and valuable global payments network. The company shows the continued strength of its underlying operating model through its segments, Banking and Payments. The firm’s fiscal second quarter witnessed loan growth, higher non-interest revenue, and higher net interest margin. In payment services, the pre-tax income was up $207 million year-over-year while payments services volumes increased 11% since 2023. In digital banking, pre-tax income rose $694 million while total loans increased 8%, year-over-year.
The company’s merger with Capital One is also underway with the progressing regulatory approval process in connection with the merger applications. This merger will bring two strong brands together that have a long track record of attractive and resilient financial results. It will also enable the Discover network to be more competitive with the biggest payments networks and payments companies while fulfilling Capital One’s quest to build a global payments company.
As of Q2, Discover Financial Services (NYSE:DFS) is held by 68 hedge funds and ranks among the 10 best digital payment stocks to buy now. Brave Warrior Capital is the largest shareholder in the company.
5. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) serves as a globally integrated payments company. The company started off as a freight forwarding company in 1850. It operates through multiple segments, including U.S. Consumer Services, Commercial Services, International Card Services, and Global Merchant and Network Services. The firm’s integrated payments platform comprises card-issuing, merchant-acquiring, and card network businesses.
American Express has efficiently positioned itself as the world’s largest integrated payments platform. The firm’s broad and diverse customer base including consumers, small businesses, mid-sized companies, and large corporations spans the globe. Its world-class service has also earned it a place among the most valuable brands in the world. Thus, the brand name remains strong and intact.
The quality of AXP’s loyal premium customer base with high spending and excellent credit profiles, a well-managed expense base, and the rapidly expanding scale of the business have brought momentum to the firm’s core business. The growing scalability of American Express can also be witnessed from the 24 consecutive quarters of double-digit growth in card fee revenue and strong new account acquisitions. Revenues have expanded by almost 50% as compared to 2021’s year-end while card member spending has risen by nearly 40%.
The leadership position in the digital payments landscape, brand name, and strong growth trajectory rank the firm among the 10 best digital payment stocks to buy now. The number of hedge funds owning stakes in American Express Company (NYSE:AXP) was 68 in Q2 2024. The consolidated value of these stakes is nearly $38.48 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q2.
4. Fiserv, Inc. (NYSE:FI)
Number of Hedge Fund Holders: 73
Fiserv, Inc. (NYSE:FI) serves as a leading global provider of payments and financial services technology solutions. The firm enables money movement for financial institutions, people, and businesses. It was in 1984 that First Data Processing and Sunshine State Systems merged together to create a national data processing organization focused on the financial services industry, Fiserv.
Fiserv, Inc. (NYSE:FI) serves as the largest global provider of technology solutions to the financial services industry. With more than 6 million merchant locations globally and over 25,000 financial transactions per second at peak, the firm really is a leader having 40 years’ experience in fintech and payments leadership. Through its integrated solutions, strong client franchise, and strategic positioning, the industry leadership position remains strong.
The reach and scale of the company remain broad. Fiserv claims to be unique in its reach across all parties including the consumer, the digital wallet provider, the issuer, and the merchant. This network effect leaves the firm with ample opportunities to accelerate its business growth. Fiserv had the vision of scaling platforms to support a breadth of solutions, merchant acquiring, debit and credit issuer services, and digital payments back in 2019 and that is what the firm has achieved.
Recently, the company delivered a strong second quarter with 18% growth in both organic revenue and adjusted earnings per share. With 6% growth in the Financial Solutions segment and 9% growth in the Merchant Solutions segment, Fiserv recorded a 7% year-over-year rise in its adjusted revenue. This reflects the firm’s commendable performance across the business.
The stock was held by 73 hedge funds, as of Q2 2024. Harris Associates was the most prominent shareholder in the company. Hence, Fiserv, Inc. (NYSE:FI) is one of the best digital payment stocks to buy now.
3. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 87
PayPal Holdings, Inc. (NASDAQ:PYPL) enables digital payments on behalf of merchants and consumers globally. The firm was founded as the world’s first digital payment platform and has been revolutionizing commerce globally for over 25 years. It combines its best-in-class payments platform with value-added services to drive profitability.
PayPal is a trusted global brand with a two-sided network at scale which is exactly its unique competitive advantage. The firm holds an attractive industry position in a $6 trillion-plus global e-commerce market that benefits from the current digitization of payments and commerce. With continued engagement growth and debit card adoption, PayPal is benefitting from Venmo’s strong market position. To further expand its addressable market, the digital payments company is offering more value-added services for consumers and merchants while building omnichannel capabilities.
Apart from the hard-to-replicate advantage and the business strength, PayPal Holdings, Inc. (NASDAQ:PYPL) has strong financial results to offer. Highlights from the fiscal second quarter include net revenues increasing 8% to $7.9 billion, total payment volume increasing 11% to $416.8 billion, and payment transactions increasing 8% to 6.6 billion. With monthly active account growth across PayPal and Venmo, the firm drove customer momentum. Furthermore, it recorded its best transaction margin dollar growth since 2021.
Based on the strength and momentum being witnessed across PayPal, the firm is positioned well for durable and profitable long-term growth. As of Q2 2024, PayPal Holdings, Inc. (NASDAQ:PYPL) was held by 87 hedge funds thereby ranking on our list. Citadel Investment Group was the top shareholder with a stake worth $469 million.
2. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 142
Mastercard Incorporated (NYSE:MA) is a global payment technology solutions company that serves consumers, small and medium businesses, government and public sector, large enterprises, as well as banks and credit unions. The firm has pioneered technology to make payments smarter and safer for over 50 years. Mastercard’s purpose revolves around powering an inclusive digital economy that tends to benefit all.
Mastercard serves as a payments industry leader which is currently demonstrating broad-based momentum across all aspects of its business. It continues to drive growth in payments through expanding in new geographies, winning and retaining deals, and digitizing the payments ecosystem. A prime example of this is Africa which is the world’s largest adopter of mobile money accounts. Mastercard partners with large telcos and mobile network operators including Airtel, MTN, and Vodafone Egypt to increase its market share in Africa.
With double-digit net revenue and earnings growth, the firm successfully closed another quarter. Driven by the growth in the payment network and value-added services and solutions, net revenue went up by 11%. The cross-border volume growth of 17% year-over-year and healthy consumer spending supported the company’s strong results.
As Mastercard continues to lead its way in digital payments, it is addressing consumer pain points. Recently, the company launched its new Payment Passkey Service which is debuting first in India. This service replaces traditional passwords and OTPs with device-based biometric authentication methods. The Payment Passkey Service is a game changer for online checkout and supports Mastercard’s vision for a token economy. In a market where fraud cases have risen by nearly 300% in the last two years, the firm is freeing so many Indian users from the trouble of forgetting or accidentally sharing their passwords or OTPs.
The strong business fundamentals, a diversified business model with healthy consumer spending, established demand for value-added services, and the persistent shift to digital forms of payment place Mastercard Incorporated (NYSE:MA) in a good market position. As of Q2 2024, the stock is held by 142 hedge funds thereby ranking among the best digital payment stocks to buy now. Akre Capital Management was the top shareholder with a stake worth $1.7 billion.
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 163
Visa Inc. (NYSE:V) is a trusted leader in digital payments. The company facilitates transactions between merchants, consumers, government entities, and financial institutions across more than 200 markets. Visa’s journey started in 1958 when the Bank of America introduced the first consumer credit card program in the United States. It was in 2007 that Visa formed a global corporation and eventually went public in 2008 in one of the largest IPOs of all time.
With the ambitious purpose of being the best way to pay and be paid, Visa Inc. (NYSE:V) powers the global economy. The firm connects 4 billion account holders to more than 130 million merchants, 14,500 financial institutions, and governments. Among its peers in the transaction and payment processing services, Visa has a significant market cap of $540.20 billion. The firm accelerates its revenue growth in consumer payments, new flows, and value-added services.
In consumer payments, Visa moves trillions of dollars of consumer spending in cash and checks to cards and digital accounts. The firm recently closed a good fiscal third quarter of the year with net revenue growth of 10%. The key business drivers during the quarter were payments volume increasing by 7%, processed transactions increasing by 10%, and cross-border volume increasing by 14%, on a year-over-year basis.
Visa drove strong payments volume growth rates in most major regions including Latin America, CEMEA, and Europe ex U.K. Only Asia Pacific payments volume slowed due to the difficult macro environment in China. Beyond payments, the company is also building its portfolio of value-added services for its clients and partners. These value-added services offer the firm an opportunity to diversify its revenue.
Visa’s financials remain robust. The firm recorded $32.7 billion in net revenue and $12.3 trillion payments volume in 2023. In conclusion, the firm has a lot to offer through its globally spread reach, brand value, financial strength, and its leading market position. As of Q2, Visa Inc. (NYSE:V) is held by 163 hedge funds. TCI Fund Management was the largest shareholder in the company with a stake worth $4 billion.
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