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5 Stocks to Gain From Rising Use of Mobile Payments

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Mobile payments have revolutionized the way we spend, helping make contactless payment through a smartphone. Needless to say, consumers nowadays are more willing than ever to use mobile devices to split a bill, pay back a friend or pay a babysitter.

So, how does mobile payment work? At a point-of-sale, especially at a supermarket checkout counter, smartphones use near field communication system to make payments without a debit/credit card. During purchases, the mobile device sends the consumer’s payment details through the Internet to the merchant’s website or app, thus, making payments less complex.

With the trend catching up, the mobile payment market is widely expected to touch $4.5 trillion in 2023. Thus, it will be wise to take a look at the top companies gaining from it.

Square Can’t be Ignored

Square, Inc. (SQ - Free Report) is famous for its platform that helps companies set up point of sale terminals and mobile payment card readers. Majority of its revenues come from the fees collected whenever a person makes a purchase through its platform. The company is also looking to expand its Square Cash app, which helps users send money. This popular app is currently posing stiff competition to rival PayPal Holdings, Inc.’s (PYPL - Free Report) person-to-person payment app, Venmo.

With around $23 billion market cap, Square is improving steadily with its gross payment volume jumping 29% in its recently-reported quarter. The company’s overall sales have soared 51% so far this year, which is why its shares are up more than 30% on a year-to-date basis.

Square currently flaunts a Zacks Rank #2 (Buy). In the past 60 days, two earnings estimates have moved north, while one moved south for the current year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s expected earnings growth rate for the current and next quarters are a solid 62.5% and 83.3%, respectively. In fact, the company’s projected earnings growth for the current year is 70.4%, way higher than the Internet - Software industry’s expected gain of 11.8%. The stock possesses a Growth Score of A.

Alipay’s 1 Billion Users

Investors should keep in mind that Alibaba Group Holding Limited (BABA - Free Report) is a dominant tech player in the Chinese market. But the e-commerce company is fast becoming a major player in the mobile payment market space.

Its mobile payment app, Alipay currently has a whopping 1 billion users and is used in 110 countries. China, in particular, has the world’s largest mobile payment market and Alipay processes more than half of the countries mobile transactions.

Alibaba’s growing mobile payment market helped the e-commerce giant’s overall sales surge 41% to $17.1 billion in the third quarter on a year-over-year basis, and earnings 15%.

Alibaba currently has a Zacks Rank #3 (Hold). In the past 60 days, eight earnings estimates have moved up, while none moved down for the next year. The Zacks Consensus Estimate for earnings has risen 3.8% in the same period.

The company’s expected earnings growth rate for the current and next quarter are a promising 17.6% and 18.9%, respectively. In fact, the company’s projected earnings growth for the current year is 3.4%, in contrast to the Internet - Commerce industry’s expected decline of 2.2%. The stock also has a Growth Score of B.

Tencent’s WeChat Pay

Tencent Holdings Limited’s (TCEHY - Free Report) biggest service is WeChat app, which currently boasts 1 billion active users, mostly in China. The social media app helps users pay bills, opt for ride-sharing services, play video games and share social media updates, among a few.

Thanks to so many active WeChat users, Tencent’s sales climbed almost 24% to RMB 80.6 billion ($11.95 billion) in the most recent quarter, while earnings per share jumped 29% to 2.44 yuan.

The Zacks Rank #3 company’s expected earnings growth rate for the current year is 12.4%, in contrast to the Internet - Services industry’s estimated decline of 2.1%. The Zacks Consensus Estimate for its current fiscal-year earnings has risen 2.6% in the past 60 days.

These Banks Are Investing Heavily in Mobile Payment Technology

While all banking behemoths are investing in mobile payment technologies, the ones that stand out are Bank of America Corporation (BAC - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) . Bank of America has more than 26 million active mobile users. Its users, in fact, have logged into their accounts using smartphones more than a billion times in the most recent quarter, a number that has more than doubled since 2015.

Bank of America’s mobile app not only executes standard banking transactions smoothly, it also gives account holders access to digital mortgage and auto shopping experiences installed within its mobile app.

Bank of America currently has a Zacks Rank #3. In the past 60 days, five earnings estimates have moved north, while four moved south for the next year. The Zacks Consensus Estimate for earnings has risen 0.4% in the same period.

The company’s expected earnings growth rate for the current and next quarter are a steady 6.5% and 15.9%, respectively. In fact, the company’s projected earnings growth for the current year is 8.8%, higher than the Banks - Major Regional industry’s expected gain of 7.5%. The stock also possesses a Growth Score of B.

JP Morgan’s mobile numbers are even more remarkable. It boasts more than 30 million active mobile users, and the number has been consistently growing over the past several years. Lest we forget, it has launched Finn by Chase, an all-mobile bank that gives customers free access to tens of thousands of ATMs.

JP Morgan is also a big participant in Zelle, the mobile payment-to-payment platform. The Zelle Network is known for helping account holders send money to friends using their phone number or email address.

JP Morgan currently has a Zacks Rank #3. The company’s expected earnings growth rate for the next quarter is 11.8%. In fact, the company’s projected earnings growth for the current year is 9.2%, higher than the Banks - Major Regional industry’s expected gain of 7.5%.

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