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The disappearance of the credit card is greatly exaggerated.
Yes, companies like Square (SQ) and Pay Pal (PYPL), which owns Venmo, are hot – especially with Generation Y.
But stocks of American Express, Visa and MasterCard all reached record levels last week.
AmEx (AXP) the stock is up more than 10% this year. Visa (V) is up about 30%, making it one of the best stocks in the Dow. Only Microsoft (MSFT) and Nike (NKE) have performed better.
And MasterCard (MY) rose by 45% in 2018. Both Visa and MasterCard rallied on Tuesday after both parties settled a long-standing class action lawsuit against retailers for $ 6.2 billion in operating costs.
It's easy to dismiss these credit card companies as financially endangered, endangered species because people are using credit and debit cards less often, not to mention the fact that they are not safe. ;money.
Yet all three benefit from their own digital efforts.
Big investments in the future of money
Visa, for example, is one of the main holders of Square, with a participation of over 1%. Visa has also recently announced an investment in Japanese financial technology startup Paidy.
MasterCard has also made investments and technology acquisitions.
Last month he bought Oltio, a South African mobile payment company. It has a new debit card that allows Venmo users to buy products with their Venmo money at stores where MasterCard is accepted.
MasterCard also comes to invest in Divido, a company that allows people to pay in multiple installments, while the seller is paid in full instantly. American Express has also announced an investment in Divido.
And AmEx, with Visa, has invested in starting Stripe payment processing, a Silicon Valley unicorn worth more than $ 9 billion.
These three companies realize that they all have to adapt to the rapidly changing digital landscape if they want to stay relevant.
But they also continue to see a great growth opportunity for their traditional credit card business in some markets where cash remains the priority.
This includes Europe. In Spain, Italy and Poland, people still use cash for around 60% of their expenses, Visa chief executive Al Kelly told analysts last month at the company's earnings conference call .
"Cash still accounts for a significant share of consumer spending in several of Europe's largest economies, including around 60% in Spain, Italy and Poland," said Visa CEO at analyst conference call the month. latest.
High consumption expenditure
US consumers do not spend much thanks to a solid economy.
MasterCard CEO Ajay Banga said strong retail sales in the US during the results conference call last month. Banga said low unemployment and healthy consumer confidence bode well for the company.
And even if people use credit cards more, they do not face major financial problems by going into more debt.
The credit rating agency TransUnion said in May that delinquency rates were still relatively low. Only 1.8% of loans are overdue for 90 days and this rate has been stable for a few years.
Analysts are also optimistic about the credit card giants. Wall Street expects a 20% jump in MasterCard sales this year. Analysts also expect a 20% increase in AmEx revenues and an increase of about 12% in Visa sales.
A mix of the most famous advertising slogans from the past perfectly sums up the perception of investors. As corporations, AmEx, Visa and MasterCard are everywhere you want to be. As stocks, they can be priceless. Do not leave without them.
CNNMoney (New York) First published September 19, 2018: 9:25 ET
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