I recently attended a seminar on the electronic payments industry and where it is heading. Sounds exciting, right? I admit it was a bit of a snoozer but there were some points that I thought you might find interesting. For instance, here is one stat that I found pretty surprising:
e-commerce sales only make up about 10% of total retail sales, as of 2018 (see graph above).
I thought that percentage would have been much higher, just based on my household’s monthly online purchases. I actually believe that graph is underestimating e-commerce growth over the next 5 years.
Another chart that piqued my interest was the process of how a non-cash payment gets processed:
You can see how many different parties are involved in a simple electronic transaction. Now, picture this happening over 13,000 times per second every day! You can see that multiplying that number of transactions by those small fees shown above x 60 seconds x 60 minutes x 24 hours x 365 days is…. a lot of revenue generated annually for all of those players in the process. Knowing this and the expected growth of this industry makes for a good starting point for investment opportunities.
There are a lot of companies involved in moving money electronically, from card issuers to the companies that make the technology to make it all happen. As with any high growth sector, there are going to be winners and losers (Apple and Blackberry in the smartphone market). You definitely want to do your research and never place your all your bets on one company.
Let me know if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
