The financial transaction services industry is expected to benefit from expanding transaction volumes, resulting from the widespread adoption of digital means. The ongoing digitization movement, triggered by the pandemic, is a major catalyst for this industry.
The industry is part of the Financial Technology or the FinTech space. The industry players comprise card and payment processing and other solution providers, ATM services and money remittance service providers, and providers of investment solutions to financial advisors. The players in this segment operate their unique and proprietary global payments network that links issuers and acquirers around the globe.
A higher Internet penetration rate and increased usage of smartphones contribute to the increased uptake of digital payments. In light of the prevailing scenario, it has become inevitable to build an enhanced contactless payments suite or upgrade the existing ones.
Owing to the long-term benefits that such investments provide, the industry players have come up with diversified contactless payment options such as mobile wallets, biometrics and QR codes. Such initiatives will enable the players to solidify their presence in the global digital payments market, boost their customer base and diversify income streams.
Improved consumer spending implies greater utilization of product and service offerings of financial transaction services players. This, in turn, offers an opportunity for industry players to process higher transaction volumes. Also, the ease with which e-commerce shopping can be done within the comfort of one’s home is likely to provide an impetus to growth in consumer spending.
To build a comprehensive digital solutions suite, the industry players frequently pursue mergers and acquisitions alongside their technology investments. These strategies are vital for enhancing capabilities, gaining diversification benefits, expanding the customer base, and strengthening global presence.
Financial transaction services stocks with exposure to the cross-border business are well-positioned to capitalize on increased international trade, increased travel, whether for recreational or office purposes, and the ongoing demand for efficient remittance services. Companies offering advanced cross-border payment solutions stand out as attractive investments, as they facilitate seamless international transactions and manage currency exchange.
These solutions play a crucial role in enabling businesses to easily accept payments from customers in different countries and make timely supplier payments, ensuring smooth operations. The growing international workforce continues to drive the demand for effective cross-border remittance services.
Our Top Picks
We have narrowed our search to five financial transaction stocks that have strong growth potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Zacks Investment Research
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Envestnet Inc. ENV provides wealth management software and services in the United States and internationally. ENV operates through two segments: Envestnet Wealth Solutions and Envestnet Data & Analytics. ENV has strong asset-based and subscription-based, recurring revenue-generation capacity.
Envestnet continues to focus on technology development to improve operational efficiency and increase market competitiveness. The demand for personalized wealth management services is creating solid market opportunities for ENV’s technology-enabled solutions and services. An increasing current ratio also bodes well.
Envestnet has an expected revenue and earnings growth rate of 9.6% and 24.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days.
Coinbase Global Inc. COIN provides financial infrastructure and technology for the crypto economy in the United States and internationally. COIN offers the primary financial account in the crypto space for consumers, a marketplace with a pool of liquidity for transacting in crypto assets for institutions, and technology and services that enable developers to build crypto-based applications and securely accept crypto assets as payment.
Coinbase Global has an expected revenue and earnings growth rate of 92% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days.
Cantaloupe Inc. CTLP is a digital payments and software services company, which provides technology solutions for the unattended retail market. CTLP offers integrated solutions for payments processing, logistics, and back-office management.
CTLP also provides ePort, an integrated payment device that is deployed in self-service, unattended market applications, such as vending, micro-markets, amusement, arcade, commercial laundry, air/vacuum, car wash, and others, which facilitates digital payments, and integrated software services for payment or asset tracking devices.
Cantaloupe has an expected revenue and earnings growth rate of 15.9% and 56.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.8% over the last seven days.
Repay Holdings Corp. RPAY is a payments technology company that provides integrated payment processing solutions to industry-oriented markets in the United States. RPAY operates through two segments: Consumer Payments and Business Payments. RPAY’s proprietary, integrated payment technology platform reduces the complexity of electronic payments for merchants.
Repay Holdings has an expected revenue and earnings growth rate of 7.1% and 3.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.2% over the last 60 days.
Shift4 Payments Inc. FOUR provides software and payment processing solutions in the United States and internationally. FOUR offers a payment platform, omni-channel card acceptance and processing solutions across multiple payment types, including credit, debit, contactless card, Europay, MasterCard and Visa, QR Pay, and mobile wallets, as well as alternative payment methods.
Further, FOUR provides merchant underwriting, onboarding and activation, training, risk management and support services, and software integrations and compliance management, and partner support and services. FOUR distributes its products through independent software vendors, internal sales and support network, enterprises, and value-added resellers.
Shift4 Payments has an expected revenue and earnings growth rate of 40.8% and 36.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last seven days.
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