The shift in payment space to e-commerce works in Visa Inc.’s (V – Free Report) favor because its share of digital commerce is approximately thrice the physical point of sale.
Courtesy of COVID-19, e-commerce emerged as the most convenient way to shop with many people continuing to stay at home. Given this uptrend, online holiday sales are set to triple last year’s figure, according to new projections from software provider Salesforce.com, Inc. (CRM). This is further likely to rev up the players in the payment space where Visa rules as one of the leading companies.
For decades, the company’s growth has been driven by the strength of its core business solutions — credit, debit and prepaid products — as well as its global ATM network. Its first quarter fiscal 2021 results are likely to gain from an increase in processing fees from higher online sales.
Per Salesforce.com’s latest projections, online holiday sales in the United States are projected to surge 34% year over year for the 2020 season, nearly tripling the prior-period growth of 12%. The pandemic-induced uptick in e-commerce this year is set to extend to the holidays. Although total sales through all channels are expected to remain flat, digital will make up 30% of the seasonal spending as the company predicts.
For the November-December period, digital revenues are anticipated to hit a record $221 billion while total holiday sales will reach $730 billion.
The unparalleled jump in online orders during COVID-19 helped the payment companies, which suffered lower transaction processed due to declined cross-border activity and reduced travel and entertainment expenditures.
Visa is well-equipped to cash in on the shift to digital payment method with the launch of click-to-pay solution. Its Visa Token service, tap to pay, Visa Direct provide a quick and safe transaction experience to customers.
Continued recovery in domestic payment volumes and transactions will improve the data processing revenues. Notably, Visa remains the frontrunner with $8.5 trillion of payment volumes compared with $4.3 trillion for Mastercard Inc. (MA – Free Report) , American Express Co. (AXP – Free Report) and $172 billion for Discover Financial Services (DFS – Free Report) .
During fiscal 2019, the company saw 201.9 billion payments and cash transactions under Visa’s brand, equating to 553 million transactions a day, on average. Of the 201.9 billion total transactions, 138.3 billion were processed by Visa.
The company by virtue of its several solid partnerships, superior technology and a vast global network is set to reap benefits from the currently booming e-commerce space.
In six months’ time, the stock has gained 14.6% compared with its industry’s growth of 19.6%.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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