We recently compiled a list of 10 Best Digital Payments Stocks To Buy Now. In this article, we will look at where Discover Financial Services (NYSE:DFS) ranks among the 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.
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).
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.
Overall FI ranks 4th on our list of the best digital payments stocks to buy. While we acknowledge the potential of FI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than FI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
