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Field Notes: Insights on the Global Payments Ecosystem

Global Team Perspectives by Alex Wolf, CFA

In September, we published a post discussing the global payments ecosystem and the investment potential we believe this theme offers. We recently attended the Money20/20 conference in Las Vegas, an event focused on the future of money, and heard from some of the world’s leading experts in payments, regtech, blockchain and cryptocurrencies, and digital trust. These sorts of forums provide an excellent complement to our in-house research, and we gained an even deeper understanding of the global payment ecosystem and its nuanced investment opportunities.

In our September post, we wrote about how payment processors have evolved by providing innovative add-on offerings, such as fully integrated services and data analytics. Coming out of this recent trip, it is even more evident to us how much the industry has developed, moving away from its historic role as an annoying cost center to now enabling businesses to reach new goals. Payment processors play an integral role in many parts of running a business, as well as in helping consumers manage their lives. For a merchant, data provided by payment processors allows for full integration of supply chains and foundational logistics data. Merchants can also use this data to develop deeper and more direct digital relationships with consumers. From a consumer standpoint, payment networks facilitate shopping for financial services products and managing household expenses, by voice or fingertip. The role of a pure processor has shifted to becoming a gateway to much deeper relationships. This is especially true in allowing FinTech companies to reach the historically underbanked population around the world.  

In our previous post, we noted that companies with the ability to seamlessly process payments across countries and currencies will have an edge. This has become even clearer to us as we heard from leaders in the industry talk about how difficult it can be to navigate across geographies. It is a treacherous road getting proper licensing and dealing with local regulators. With initiatives like One Belt One Road being crucial to economic development, investments into the payment infrastructures of those channels will play a major role into the success of the initiative. These will include enabling faster payments across countries and better foreign exchange capabilities. Cross-border payments is an important step in this process, where trust and compliance at a global scale is essential. As the global payment ecosystem continues to evolve, the ability to negotiate and navigate complex strategic partnerships will be key to success. With consolidation likely to continue, companies that have the necessary competencies have a great advantage.

Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be suitable for all investors. References to specific companies, securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to buy or sell. The above commentary for informational and educational purposes only and shouldn’t be considered investment advice.

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