We recently 10 Best Digital Payments Stocks to Buy According to hedge funds using the latest sentiment data. In this article, we'll take a look at how Fiserv Inc (FI) stands in relation to other digital payments stocks.
The rapid growth of the internet and the widespread use of smartphones have transformed the way most people interact with the world. Before the current technological era, to send money locally across borders and long distances, users had to visit a payment provider's branch, such as Western Union, or access a bank account.
A host of payment service providers now allow customers to send money over their smartphones or the internet. Companies like Visa and Mastercard are also known as payment gateways because they operate networks that allow bank accounts, retailers and consumers to send money to each other. Meanwhile, Paypal's Venmo and Jack Dorsey's Square are more pure-play payments stocks, because they enable nearly anyone with a phone that can access the service to send money.
Digital payment stocks move in tandem with the economy because they move money. When the economy is strong and money is moving, these companies will see more trading volume. This allows them to earn more in fees and commissions. To track the performance of digital payment stock indexes, you can look at the Nasdaq CTA Global Digital Payments Index. Between February 2022 and October 2023, when investors were concerned about the impact of inflation and high interest rates on the economy, the index fell nearly 38%. However, since October, it has risen 46%. The U.S. economy has surprised investors and policymakers over the past two quarters, and investors do not seem to have missed the potential for digital payment stocks to benefit from artificial intelligence and improve customer service.
In fact, artificial intelligence is already beginning to make inroads in digital payments. One such effort is underway at Mastercard, which recently made a major announcement. A customer's card number is one of the most sensitive pieces of information in their biometric profile, and access to this information poses the risk of significant losses through fraudulent payments. The company now plans to leverage artificial intelligence to strengthen the security of compromised retailer networks and point-of-sale (POS) systems.
Through the service, the company hopes to spot compromised cards before the data is used fraudulently, and to improve detection rates for merchants at risk from fraudsters by 300%. Mastercard's announcement comes just days after Visa rolled out its biggest upgrade to U.S. payment cards since the introduction of chip-based cards, allowing users to consolidate their various bank cards under one umbrella and automatically classify payment transactions as debit or credit cards depending on the transaction value.
The two biggest players in the payments market are at the center of major legislative proposals in the UK. The UK Payments Systems Regulator is proposing new rules for how the companies share information with regulators and decide on increasing merchant fees. Businesses pay the companies processing fees and other charges every time a transaction is made through their networks. UK businesses have criticized the high fees, but Visa and Mastercard have defended their actions, pointing to the value their networks provide.
The changes in the UK come after a historic settlement that forced both companies to lower their fees in the US. Indeed, regulators on this side of the Atlantic also announced new rules that allow popular startups known as buy now, pay later (BNPL) companies to be credit card providers. This means that companies like Block, PayPal, Affirm and others will have to follow the same rules as credit card providers when it comes to disputes and refunds. Naturally, this will increase the cost of doing business.
These trends show that the digital payments industry is constantly on the lookout for changes brought about by new technologies and regulatory changes. The fact that internet usage is expected to continue to grow means that these companies could experience rapid user growth. This opens up new avenues for companies to improve their services, but also increases the risks for their business. If you want to learn more about consumer spending and its future, click here. The 20 Countries with the Highest Consumer Spending in the World.
Our Methodology
To compile a list of the best digital payments stocks to buy, we ranked the holdings of the Amplify Mobile Payments ETF, which tracks the Nasdaq CTA Global Digital Payments Index, by the number of hedge funds that bought shares in the first quarter of 2024. Why are we interested in stocks that hedge funds are flooding? The reason is simple: our research shows that you can outperform the market by mimicking the top holdings of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter and has returned 275% since May 2014, beating the benchmark by 150 percentage points.Click here for details).
Fiserv Inc. (NYSE:FI)
Number of hedge fund investors in Q1 2024: 69
Fiserv, Inc. (NYSE:FI) is a diversified financial services company that assists users with card payments, commerce processing, and other requirements. It's one of the highest-rated digital payments stocks on our list, with an average rating of Strong Buy from 31 analysts. The average price target is $170. Here's what Oakmark Funds said about FI recently:
Fiserv, Inc. (NYSE:FI) was the largest contributor during the quarter. The company is a leader in merchant acquiring, issuer processing services, and core banking software. During our holdings, under the leadership of CEO Frank Bisignano, Fiserv has delivered peer-leading organic growth, significant margin expansion, and mid-teen earnings per share growth. We believe the company can achieve similarly impressive results over the medium term, but its shares currently still trade at a significant discount to the S&P 500 Index. We believe Fiserv's strong performance continues to make it an attractive investment.
69 hedge funds in Insider Monkey's database had bought shares in Fiserv, Inc. (NYSE:FI) at the end of the first quarter of 2024. The largest holder of the stock was Natixis Global Asset Management's Harris Associates, valued at $2.2 billion.
As a result, Fiserv ranks fifth among the 10 best digital payments stocks to buy now. The 10 best digital payments stocks to buy now Let's take a look at other digital payments stocks that hedge funds are watching.
Disclosures: None. This article was originally published on Insider Monkey.
