We recently compiled a list of 10 Best Digital Payments Stocks To Buy Now. In this article, we will look at where Mastercard Incorporated (NYSE:MA) 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).
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.
Overall MA ranks 2nd on our list of the best digital payments stocks to buy. While we acknowledge the potential of MA 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 MA 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.