The Biggest News in Digital Payments
Dear Wall Street Daily Reader,
The Cryptosphere can’t contain its enthusiasm over the breaking news:
Visa Inc. (V) will soon accept settlement in USD coin, a cryptocurrency pegged to the U.S. dollar.
As one of the largest payment processors in the world, you couldn’t ask for a bigger validation of digital currencies.
Even as a crypto skeptic, I’ll concede the news represents a significant step towards potential mainstream adoption of digital currencies.
But it’s not the most significant news in the digital payments space in recent weeks.
As I’ve told you before, the pandemic is proving to be the biggest catalyst for the adoption of contactless payment solutions. Or essentially, digital money.
Admittedly, the market was already primed for an increase in contactless usage. But uptake was slow because of a lack of consumer awareness and trust.
Then the pandemic literally forced adoption, as everyone needed to avoid physical contact as much as possible. Whether they trusted contactless or not.
And now, the latest data proves just how much the pandemic accelerated this shift…
During the past year, the use of cash by Square, Inc.’s (SQ) merchants dropped a staggering 10 percentage points.
This rate of decline represents a threefold increase from the average annual decline over the last five years.
In other words, the pandemic essentially accelerated the move away from cash by three years. And counting.
I say that because, while Square’s business report is representative of the market, it’s not all-inclusive.
On the other hand, the Fed’s Diary of Consumer Payment Choice is a more broad and comprehensive measure of this shift away from cash.
I expect the next update to reveal cash usage as a percentage of total transactions will drop below 20% for the first time in history.
Investing in Action, Not Intention
At the end of the day, I’m convinced the digital payments boom is a more reliable and investable trend right now than cryptocurrencies.
While it’s true that consumer interest in cryptocurrencies surged during the pandemic, with nearly 40% now believing it’s the future of money and will be a widely accepted payment method within five years, there’s a (big) difference between interest and action.
Nowhere near 40% of consumers actually use or own cryptocurrencies. That figure checks-in at about 6% in the U.S.
In comparison, the pandemic propelled “digital wallet spending” high enough that it now represents the most popular payment method for e-commerce and point-of-sale transactions, according to the latest Global Payments Report.
The natural question then becomes — is your portfolio positioned to profit from this digital payment boom?
If not, there’s an easy way to add exposure:
The ETFMG Prime Mobile Payments ETF (IPAY).
If you believe and invest in the potential of crypto, you should be doing the same with digital payments.
Because the more the latter trend accelerates, the more likely it becomes that consumers will one day transition from being simply interested in paying with cryptocurrencies to actually using them.
Ahead of the tape,
Editor and Founder, Trend Trader Daily