The “Nasdaq 100 (QQQ)” has been on fire with one of the hottest sectors being digital payment platforms. Shares of “Square (SQ)” and “Paypal (PYPL) are up 92% and 87%, respectively, since their March lows. While they still have a bright future, their story is well known and the stocks seem fully valued…
Instead, I’m looking at 2 under-the-radar fintech stocks that operate outside the U.S. as overlooked gems offering a great way to play digital payment platforms. The growth of mobile payments is well documented and the choice of platforms for both users and investors is large. But, there’s a pair of Brazilian-based companies that present a largely untapped market.
Overall, mobile payments, in which everything from pure-play credit card firms like SQ and PYPL to digital wallets like “Apple (AAPL)” Pay, had been growing by some 30% per year through 2019, have now accelerated in the wake of the pandemic.
But, some areas are growing faster than others. Emerging economies have been growing at nearly double the rate of development thanks to several key factors; emerging economies have a large unbanked population, as banking services are either not available or unaffordable. In many regions, the adoption or reliance of smartphones is a fundamental necessity for communication and transactions.
Mobile payments fulfill the demand for cheaper, faster, and convenient services, traditional payment service providers, such as banks and credit card companies, are facing major challenges. Traditionally, to accept credit cards, businesses needed the assistance of banks or landline telephone. Mobile payment systems have done away with this requirement, making them ideal for mobile market vendors. Furthermore, unlike bank credit cards, mobile payment does not have to ensure a fixed volume of transactions to qualify for an account, making it ideal for small businesses.
My belief is that Brazil presents the greatest opportunity in this sector and two companies, “Stone Capital (STNE)” and “PagSeguro (PAGS)” are best positioned to benefit.
Unlike SQ and PYPL which are now behemoths with market capitalizations of $56 billion and $220 billion STNE and PAGS are relatively small with market caps of just $6 billion and $12 billion respectively. Meaning as they grow and get discovered by money managers it will only take incrementally fewer investment dollars to move the stocks much higher.
The fact that the current growth rate of Brazil’s mobile payments is below many markets such as China and…
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