With the Black Friday shopping frenzy starting to die down, it might seem like an inopportune time to hunt for payment processing stocks to buy. But the growth story for digital payments worldwide is much larger than a single weekend. This year, the global digital payments market is expected to reach over $100 billion. From there, the market is projected to grow at a compound annual rate of almost 17% through 2031.
Many people wrongly assume the days of heady growth are over for digital payments—after all, the internet has been around for decades. But there are many reasons to believe outsized growth is on the horizon. While it may seem like everyone has a smartphone these days, there are plenty of markets where the devices are just starting to take off. Sending and receiving money has become a digital transaction, and cross-border payments online are also gaining popularity. All of these trends should support double-digit annual growth in the payments space.
So, which payment processing stocks will win as the market speeds up? There are several potential ways to capitalize on this growth. Investors looking to avoid some risks should look to big names already dominating the space. Brands that people are already comfortable with offer customers some security as they make the jump online.
For those with more risk appetite, some smaller names looking to provide expertise in a particular part of the payment process are an excellent place to start. These companies are highly dependent on the market developing as expected, and their business lacks a ton of diversity. However, they’re well-placed to skyrocket should their technology underpin the payment process.
Although it comes with a healthy serving of risk, PaySafe (NYSE:PSFE) is a good choice among payment processing stocks. In the era of the SPAC IPO, we saw many duds come to market. PaySafe debuted via a SPAC and, like many of its peers, saw its valuation plummet shortly after. But there are some solid bones underneath PaySafe, and the group looks to be on track to prove itself to investors over the next year.
So far, the group’s grown its revenue at a respectable rate, and despite turning in a worse-than-expected performance last quarter, it’s still on track to meet ambitious full-year targets.
PaySafe is focused on creating technology solutions to support e-commerce’s biggest trends, from online gaming to money transfers and digital wallets. This puts the group in a strong position as these new avenues develop, so if management can stay the course, this could be a huge opportunity.
PayPal (NASDAQ:PYPL) was one of the original fintech companies and, all these years later, remains one of the top payment processing stocks to consider. The group’s now under the direction of newly minted CEO Alex Chriss, who appears to be righting the ship. The most recent results came in ahead of expectations, a sigh of relief for everyone expecting to see the cost of living crisis hit the group’s payment volumes. So far, the group has remained resilient despite a challenging environment.
But PayPal’s biggest challenge currently is profitability. Its growth engine is the group’s unbranded business, which lets businesses put their name on a PayPal payment platform. Unfortunately, these transactions are noticeably less profitable.
However, the group is planning to send profits in the right direction. For those willing to wait out some turbulence, now is an excellent time to pick up one of the OGs of the payment world.
Credit card goliath Visa (NYSE:V) needs no introduction except to say it’s one of the best payment processing stocks out there right now. Like the rest of these companies, Visa is up against potential headwinds if consumer spending doesn’t hold up. The group’s consumers are largely based in the US, with swelling debt levels. But so far, the group’s said they’re not worried about a slowdown.
What’s great about Visa’s business is that it isn’t lending any money flowing through its transactions. Instead, it charges a service fee as a middleman between banks, customers, and vendors. This means the group isn’t on the hook should a mass default materialize, though this would still be bad for business. As the online payments space continues to develop, Visa will be moving in lock-step, and that’s a good thing for investors who want a steady eddie play that will still capitalize on the market growth ahead.
On the date of publication, Marie Brodbeck did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.