Payments innovation is all around us, and its importance in digital transformation cannot be overstated. The post-pandemic landscape has seen an acceleration toward a cashless society at a rapid rate. It has driven the rise of mobile wallets and alternative forms of payment. 

According to Marqueta’s 2024 State of Payments Report, 46% of U.S. survey respondents claimed use of some form of contactless payment in the past seven days. This is in opposition to 80% in the U.K. and 69% in Australia. Emerging technologies like cryptocurrency and the metaverse is hoping to drive payment innovation and borderless payment options for users. So, we can expect a far greater volume of digital payments. 

With the global digital payments market set to grow to $16.59 trillion by 2028, leading payments players will experience sustained growth. With this in mind, let’s look at three key stocks that are best positioned to outperform their benchmarks in August. 

Block (SQ)

As a payments firm with a keen eye on future innovation, Block (NYSE:SQ) remains a popular consideration for investors. Despite its attraction, the stock struggles to recapture its 2021 momentum. Currently, it sits almost 80% below its all-time high value from this period. 

However, optimism follows Block’s positive second-quarter earnings results. In a boost to the stock’s Wall Street performance, Q2 earnings per share reached 93 cents adjusted, beating expectations of 84 cents. Also, the payments firm announced a 20% gross profit growth to $2.23 billion. This underscores the stock’s strong fundamentals moving into the third quarter. 

Perhaps the most crucial aspect of Block’s early August earnings call was the firm’s announcement of an internal reorganization plan. It is designed to facilitate greater growth and accelerate go-to-market strength. 

With emphasis on cryptocurrency and blockchain technology that underpins it, Block is well-positioned to benefit from growth within the wider crypto landscape. Therefore, many commentators believe SQ will embark on a bull run over the next 12 months. 

Global Payments (GPN)

Another payments stock moving into buy territory following recent Wall Street declines is Global Payments (NYSE:GPN). 

The stock’s recent declines and controversies have seen analysts like TD Cowen cut their price outlook for the stock from $152 to $125. And, Wall Street’s wider market volatility is clearly causing some problems for the multinational payments innovator in the short term. 

However, GPN’s recent dip below $100 may be a great opportunity for investors to discover significant returns. Furthermore, the stock has a great pedigree for outperformance. In each of the past four quarters, Global Payments has outperformed its earnings estimates. This could help to facilitate an August rebound for investors. 

Also, clear signs of institutional interest in the stock signify a turnaround in fortunes could be close. Early August saw Swedbank AB invest $4.58 million in Global Payments. Thus, it indicates that some major players believe that short-term growth could be just around the corner. 

PayPal (PYPL)

Following an exceptional Q2 earnings report, PayPal (NASDAQ:PYPL) could become one of the stars of the payment processing landscape in quarter three. 

Crucially, PayPal’s transaction margin dollars showed an 8% increase to $3.6 billion in Q2. This metric was the company’s strongest measure of growth since 2021. In recent weeks, PayPal has raised its profit forecast for the full year 2024 for the second time after signs of outperformance within the firm’s branded checkout business. 

Also, PYPL’s impressive forecasts are buoyed by the firm’s status in the payment processing industry. As one of the landscape’s earliest innovators, PayPal has amassed 426 million active registered accounts. It remains one of the most recognizable names in the industry. The post-pandemic boom period for digital payments continues to see U.S. use cases grow. PayPal’s proficiency and status as a driver of digital transformation for retailers will invariably drive more user growth. 

With the firm’s earnings and forecasts pointing in the right direction, the third quarter could be lucrative for PayPal, with a period of outperformance beginning in August.

On the date of publication, Dmytro Spilka 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.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.