#Payments is an industry in which established players benefit to wide and deep #moats and “shift to electronic payments” tailwinds. Large double digits operating profit and net margins are a pointer to the huge value of #networkeffects. Some that leading payment companies benefit from. The more consumers that are plugged into a payment network, the more attractive that payment network becomes for merchants, which in turn makes the network more convenient for consumers, and so on”. “Visa is a longtime, established market leader that still enjoys strong growth prospects. Despite the ongoing evolution of the payment industry, [Morningstar] think[s] that a wide moat surrounds the business and that Visa’s position in the global electronic payment infrastructure is essentially unassailable. .. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run. " “.. despite ongoing evolution in the payment space, a wide moat surrounds [Mastercard’s] business and [its] position in the current global electronic payment infrastructure as essentially unassailable. .. In the near term, we expect Mastercard's results to normalize to a level in line with the prepandemic period. The state of the economy [is the] biggest risk" "American Express enjoyed several years of accelerated growth as its new card acquisition and loan growth has significantly outpaced peers'. The company has historically been a payment network first and lender second. While this has not changed and it still only gets around 25% of its revenue from net interest income, its shift toward a younger cardholder base and more lending features on its cards drove a 26.1% compound annual growth rate in net interest income from 2021 to 2024, providing a major tailwind to overall growth. .. The company’s greatest strength remains its .. base of high-spending individuals and small businesses. .. This will continue as Amex's position in the premium #card market has only gotten stronger in recent years“ “PayPal’s development of a network of both merchants and consumers early in the evolution of e-commerce allowed the company to build and maintain an enviable competitive position. Historically, PayPal’s growth had been driven by the ongoing shift toward electronic payments and the rise of e-commerce” Payments in an industry that is “relatively exposed to a downturn in the economy, as online purchases tend to be discretionary. If the macro picture changes for the worse” this could have some effect on results. Graphs are from the newly released update of App Economy Insights’ “How They Make Money / Earning Visuals” https://lnkd.in/dH5_9uXv Commentary is based on Morningstar’s analysis www.morningstar.com Post is illustrative& does not constitute financial analysis or investment advice. #card #payments Sam Boboev Nafis Alam Panagiotis Kriaris Prasanna Lohar Nicolas Pinto Sandra M.Nafis Alam
Francesco great overview. The moat around incumbent payment networks is undeniable - network effects in this industry are some of the strongest in any sector. Yet, what's interesting is how these strong positions coexist with growing innovation at the edges: A2A payments, digital wallets, and embedded finance are steadily expanding use cases that bypass traditional rails altogether. The big question is how much of future growth will come from adjacencies (like lending, loyalty, or embedded commerce) versus the core network fees that built those moats in the first place.
Efi Pylarinou
3mo
"The more consumers are plugged into the network the more attractive the network becomes..." As Circle and Stripe plan their own Layer 1 blockchains to process payments 😉 Competition, transformation and even convergence of "money" and "tokenized assets".
Michael Zewdu
3mo
Great insights The payments space really shows how powerful network effects can be Visa and Mastercard with global scale, Amex with its premium base, and PayPal’s early digital lead. The shift toward cashless still has plenty of room to grow !
Jeremy Larsson
3mo
Thanks for sharing, Francesco
Dharmistha Baid
3mo
Thanks for sharing, Francesco
Thanks for sharing, Francesco