TECH - 5 Financial Transaction Stocks in Focus Amid Digital Payment Boom | Benzinga
The Financial Transaction Services industry is poised to benefit from the increasing adoption of digital solutions. A robust digital offering allows industry players to leverage this trend effectively. Favorable consumer spending patterns are expected to drive transaction volumes higher. To maintain a competitive edge, companies must invest in technology, enhance operational efficiency and diversify revenue streams. A merger and acquisition (M&A) strategy enhances capabilities. Companies like Fiserv, Inc. (NYSE: FI), Fidelity National Information Services, Inc. (NYSE: FIS), Global Payments Inc. (NYSE: GPN), WEX Inc. (NYSE: WEX) and The Western Union Company (NYSE: WU) are placed well to gain from the industry's encouraging growth prospects.
About the Industry
The Zacks Financial Transaction Services industry is part of the Financial Technology or the FinTech space, including companies with diverse natures of businesses. The industry comprises card and payment processing and other solutions 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 to facilitate the switching of transactions, permitting account holders to use their products at millions of acceptance locations. Monetary transactions are effectuated through these networks, offering a convenient, quick and secure payment method in several currencies across the globe. The industry is benefiting from the ongoing digitization movement triggered by the pandemic.
4 Trends Influencing the Financial Transaction Services Industry's Future
Widespread Adoption of Contactless Payment Methods: There has been a growing preference for contactless payments among worldwide consumers and the trend shows no mood of slowing down. With cash and checks declining in use, industry players have introduced various flexible digital payment options such as cryptocurrency, biometrics, QR codes and buy now, pay later solutions. They have enjoyed an expanding customer base and diversified revenue streams, owing to the ease and benefits that these solutions provide. Therefore, these companies are driven to invest heavily in technology to maintain a competitive edge and sustain market leadership. However, increasing digitization also attracts sophisticated cybercrimes, leading to significant losses and data breaches for consumers and merchants alike. Thus, industry players not only develop efficient payment solutions but also invest in effective fraud prevention measures.
Strong Consumer Spending: The increase in consumer spending indicates a higher utilization of the product and service offerings of industry players. This surge in consumer spending translates to higher transaction volumes and, consequently, increased revenues for these companies. Deloitte, in an article published by Deloitte Global Economics Research Center, projects consumer spending to remain robust through the first half of 2024, driven by ongoing improvements in the labor market and consistent spending levels from both business and government sectors. A tight labor market with strong wage gains and a thriving e-commerce environment is expected to keep consumer spending at favorable levels in the days ahead. However, inflationary pressures could strain consumers' purchasing power.
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