Visa Cryptocurrency Stock

2 Payment Stocks Running Circles Around Your Favorite Cryptocurrencies

2 Payment Stocks Running Circles Around Your Favorite Cryptocurrencies
Written by publishing team

Cryptocurrencies were the talk of 2021 about their huge price gains on the one hand, and their questionable usefulness on the other. Some of the world’s most famous investors are divided on this topic. While some of the famous names are big crypto bulls, Warren Buffett weighed in to tell the world that he would “never own” any cryptocurrency.

But say that to a select group of speculators who have nicely owned tokens like Shiba Inu (CRYPTO: gray hair)Which is up 49.00,000,000% since January. In other words, an investment as small as $3 in tokens coming into 2021 – if you had kept it – would have made you a millionaire today.

Image source: Getty Images.

However, Shiba Inu proves to be a bit more than the second coming of Dogecoin (CRYPTO: DOGE), which was originally created as a joke. Enthusiastic merchants have tried to send both symbols “to the moon” in their attempts to replicate the success Bitcoin (CRYPTO: BTC), which now has a market capitalization of over $1 trillion.

Limited adoption could mean poor performance from here

Unfortunately, the latest hype cycle appears to have come to a halt: Shiba Inu is down 57% from its all-time high in October, and Dogecoin is down 72% from its peak. Traders who opt for these tokens now in hopes of getting rich may be disappointed.

Part of the reason is the perceived lack of adoption of tokens by businesses and consumers. If people can’t easily spend their tokens in everyday life, they don’t have a good reason to get them, leaving pure speculation as the main use case. And the hope that someone will come later who is willing to pay a higher price than they did for the tokens may not be enough to keep demand strong or prices higher.

Code

Number of merchants accepting this token as payment

Bitcoin

7610

Dogecoin

1958

Shiba Inu

369

Data source: Cryptwerk, as of November 2021.

Based on the recent performance of these tokens, and no signs on the horizon that they will be widely adopted as a way to transact, long-term investors might do well instead to stick with some proven stocks in the fintech space.

Payment giants Square (NYSE: SQ) And viserve (NASDAQ: FISV) It has more than 100 million users combined, which means that they crush all cryptocurrencies in both transaction volume and adoption.

Square case

Square was once just a digital payments hardware company, helping small businesses facilitate credit card transactions with its popular square e-readers. But it is now one of the biggest innovators in consumer finance, with its CashApp smartphone platform having more than 40 million monthly active users.

CashApp is similar to an online banking product, except for a little less complex. It allows consumers to conduct instant peer-to-peer transactions, purchase products online or in-store through its brand Visa Card. Its investment platform also provides users with access to the stock market and cryptocurrency trading, and since they are all hosted in the CashApp ecosystem, the transfer of funds is seamless.

Cryptocurrency enthusiasts may be pleased to know that over 59% of Square’s revenue so far this year has come from Bitcoin transactions on the CashApp platform. The company earns a very small gross margin on these transactions — just 2% — so Bitcoin isn’t the biggest driver of Square’s earnings growth, but it does give investors some exposure to the space associated with the high-quality payments business.

However, there could be a new and important driver for CashApp’s growth. Earlier this year, Square announced it was buying a “buy now, pay later” leader. Postpaid for $29 billion. While Square already offers loans to businesses through Square Loans, it will integrate Afterpay into its CashApp so it can fund consumer purchases as well, adding a new revenue stream to its business.

Bitcoin may not enjoy widespread adoption on its own, but Square offers a great long-term opportunity to own a platform that can help grow the cryptocurrency’s footprint in the world of everyday commerce.

Customer making contactless payments to a barista at a convenience store.

Image source: Getty Images.

Fiserve case

If you haven’t heard of Fiserv before, it may be because it is not a consumer facing brand. She works behind the scenes in the payments industry, but has touch points with every household in America. It achieves this through the 10,000 banks and financial institutions it serves, as well as 6 million companies worldwide.

The company operates in three main areas. Its merchant acceptance segment hosts Clover Point of Sale technology, which helps businesses accept payments from customers. Clover is one of Fiserv’s fastest growing components, with total payment volume increasing 47% year over year in the third quarter alone.

The company also serves banks in two main ways. First, it facilitates instant payment processing, a much-needed service in modern commerce – and it does so with up to 12,000 transactions every second. Second, it provides the necessary financial technology for banks to offer online banking portals to their customers. About 100 million customers use Fiserv’s online banking services, even if most of them don’t realize it.

Altogether, Fiserv has more than 1.4 billion accounts registered globally, giving it a reach that most other payment giants might not reach — not to mention most cryptocurrencies.

However, the best thing about Fiserv may be its share price. With expectations that it will earn $5.58 per share in 2021, it is trading at a price-to-earnings multiple of just 17. This is much cheaper than price-to-earnings. Standard & Poor’s 500 The index, which is trading in multiples of 28. While analysts don’t expect rapid earnings growth next year, 16% at this price is likely to be enough to ensure consistent stock price growth in the long term.

After all, when weighing stocks against mostly speculative cryptocurrencies, investment cases are as much about maintaining strength over the long term as they are about actual returns.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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