The Digital Payments Market is Heating Up – Players, Mergers and More

2020 will go down as the year cashless payments went into overdrive. We’ve always known money was dirty – but the Coronavirus pandemic has driven that point home. Lately, more of us have been using cards or mobile apps to pay for things.

According to Forrester Research, merchants’ use of contactless payment apps has spiked 67% since January. Another study by Pew Research revealed a third of American adults avoid using cash payments wherever possible.

After the spring lockdown lifted, they had to find ways to attract reluctant customers back. Aside from social distancing stickers, mask mandates, and gallons of hand sanitizer, many small businesses have rolled out contactless payment options.

Tesoro Enterprises (OTCMKTS:TSNP)

Search TSNP, and it’ll leave you scratching your head. What does Tesoro Enterprises, a supplier of porcelain and natural stone products, have to do with digital payments?

The short answer: Absolutely nothing. However, once you do a little digging, their place in this article will make all the sense in the world. On November 12, 2020, HUMBL, a blockchain-based payments startup, agreed to reverse merge with Tesoro Enterprises (TSNP).

Now, why on Earth would a fintech startup join forces with a construction materials supplier? Quite simply, because TSNP was a publicly-traded company, and HUMBL wasn’t. By convincing Tesoro Enterprises to acquire them, HUMBL has leapfrogged the IPO process. Using this backdoor to go public, they can now access millions of dollars in funding from retail investors.

Unlike TSNP, savvy investors know what HUMBL is. Unlike its competitors, this firm targets markets like Latin America, Africa, and the South Pacific. Back in November, TSNP was trading at fractions of a penny per share. A few weeks ago, this stock hit an all-time high of $0.36. Since then, the stock has retreated to $0.10 to $0.15 a share – primarily due to profit-taking and investor jitters.

Is TSNP/HUMBL for real, or, is it just another pump & dump scam? We’re leaning towards HUMBL being legit. Earlier this year, Forbes named HUMBL as one of its Startups to Watch in 2020. Plus, their management team, led by Brian Foote, commands considerable respect in business circles.

However, the current mania surrounding this stock is making it volatile. Invest a conservative chunk of your investing bankroll in TSNP, but don’t stake your retirement on it. For more information about TSNP stock, check out the linked resource.

PayPal (NASDAQ:PYPL)

As payment technologies go, PayPal (PYPL) is as established as it gets – on the internet, at least. Founded in 1998, this company was the first to make seamless internet cash transfers possible.

Today, when it comes to internet payments, PayPal is among the most authoritative. After acquiring PayPal, eBay built its payment infrastructure around the service. It was a tremendous success, leading scores of business and individuals to adopt PayPal as their primary way of moving money.

As the years went by, PayPal shored up its reputation by acquiring startups like VeriSign and Fraud Sciences. While this firm now enjoys widespread acceptance, however, they’re not without detractors. In recent years, scores of consumers, freelancers, and finance bloggers have decried PayPal’s fees.

On every international transaction, you pay transaction fees, as well as exchange rate margins up to 4.5%. Plus, you’ll also pay an additional card fee of 2.9% if you use a debit or credit card. In other words, the more you send, the more you’ll lose.

These charges have allowed online money transfer providers to nip away at PayPal’s market share. On the whole, though, they’ve maintained their dominant market position. Lately, they’ve been throwing their weight around, acquiring various payment-related companies like Xoom (money transfer) and Honey (online shopping).

So, how does 2021 look for PYPL? 2020 was one of the wildest in PayPal’s history – as the global COVID lockdown unfolded, investors realized that online shopping was the only show in town. As a result, PYPL has more than tripled off its 52-week lows.

In 2021, we expect further gains, but at a more tepid pace. Buy.

Square (NYSE:SQ)

Not every business can make sales online. For every e-commerce retailer, scores of brick-and-mortar businesses are currently suffering through COVID hell. After the spring lockdown lifted, they had to find ways to attract reluctant customers back.

Aside from social distancing stickers, mask mandates, and gallons of hand sanitizer, many small businesses have rolled out contactless payment options. Rather than accept potentially-infected cash, retailers are encouraging patrons to pay via card or smartphone app.

On the latter front, Square (SQ) has seen their sales go through the roof. According to Statista, net revenue soared 63.8% YoY from Q2 2019 to Q2 2020. They’ve amassed these results in two ways. One, they charge $299 for each Square payment terminal, and two, through fees assessed on every sale made by clients.

After bottoming out at $32.33 post-COVID crash, SQ went on a relentless run. Today, the stock sells for $243.38 – more than an 800% explosion. Some retracement is inevitable, but medium to long-term, SQ is here to stay.

Square was experiencing steady, linear growth before 2020. Contactless payment technology isn’t just sanitary – it’s far easier than paying with cash. Even after COVID is over, Square will continue to grow. We rate SQ as short-term hold, and a medium-term buy.

MasterCard (NYSE:MA)

Long before the internet, MasterCard (MA) ruled the world of non-cash payments. Until alternative payment options (like PayPal) could get a foothold, credit cards like MA were the only way to pay on the internet. Even as recently as 2017, 42% of all online payments were made via credit cards.

While more retailers are adding e-wallet and crypto payment options, most only accept credit cards. You’d think this would have played into MasterCard’s hands, as commerce largely moved online in 2020. Sadly, the opposite has occurred.

In Q2 2020, MasterCard took in $3.34 billion in net revenue, down 18.7% from the year before. Analysts suspect gains in online commerce were offset by losses in offline revenue. Restaurants, hotels, and similar venues suffered massively in 2020. Without fees and currency conversion charges from these sales, MA’s cash flow took a big hit.

Despite this, we remain bullish on MasterCard. Despite their recent tough times, MA will recover. Some of this rebound has already happened – from peak-to-trough, MA has risen 39.8% this year. With vaccines rolling out, governments will vaccinate a healthy chunk of the world’s population by mid-2021.

As they do, they’ll release pent-up demand in dining, travel, events, etc. All this spending will cause a surge in MasterCard’s revenues, supporting price gains moving forward.

We rate MA as a buy.

The Cashless Revolution Rolls On

The benefits of cashless payment technologies are quickly outweighing the benefits of holding cash. With a card/phone swipe, you can now pay for anything from coffee to a tank of gas. And, as COVID has shown us, you can’t get a deadly disease by using a smartphone app.

Will physical cash become a thing of the past? Who knows. But, we’re confident of this – cashless payment options will continue to take the place of bills & coins going forward.

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