Apple Pay Technology Disruption? Visa’s Investment Moat stands firm

Last year, in this article about payment systems where I wrote about the possible disruption of Visa’s competitive moat by new entries into the payment world, such as direct transfers like PayNow, digital wallets like DBS PayLah and enhanced payment systems such as Google Pay and Apple Pay.

I opined that traditional payment networks like Visa and MasterCard are still relevant and the above initiatives will not bring severely affect the core business of companies like Visa and MasterCard.

The Bears and The News

Of course, technology companies such as Apple and Google are exciting companies and their entrance into fintech world really feels like that are taking the world on with the Industry 4.0 innovation.

With the influx of new payment methods pioneered by tech giants, it is easy for us to get into the excitement of it all and announce the premature deaths of traditional payment giants like Visa, MasterCard and American Express.

As written in this article by The Verge about Apple Pay crushing competitors in the contactless payment industry.

No Worries

Last year, I said that payment networks like Visa, MasterCard and American Express will do fine with the new competitions. And as a matter of fact, these new competitions will be beneficial to the business of the payment networks. And it seems that investopedia agrees in this article.

8 months on from my article, the comparatively more boring payment network companies like Visa, MasterCard and PayPal (PayPal works a bit differently, but they are lumped together as part of the MVP team) have beaten the FAANG team in the stock market by 27%.

According to The Nilson Report, global purchase volume of Visa and MasterCard has increased greatly from 2017 to 2018.

Apple Pay Technology Disruption Not so soon - Transaction Volume 2Apple Pay Technology Disruption Not so soon - Transaction Volume.

Apple Pay Performance

No doubt Apple Pay has stellar results of their own as well, being on track to hit 10 billions transaction in fiscal year 2019, it still does not change the fact that behind every Apple Pay app, is a credit card that is linked to a payment network.

And with Visa, MasterCard, UnionPay (not very relevant out of China, but nonetheless, it is still a payment network) and American Express, being the biggest boys out there, chances are, one of their cards are placed in Apple Pay, or Samsung Pay, or Google Pay.

Financial Numbers

Here shows the Earnings per Share (EPS) of Apple, Visa, Mastercard, American Express and PayPal.

Apple Pay Technology Disruption Not so soon - EPS

Of course, in terms of absolute revenue, none of the other companies can rival Apple. As a matter of fact, the combined revenue of the other 4 companies are only about 30% that of Apple. This is because Apple is doing more business avenue than simply conducting transaction.

However, looking at the EPS of all the companies, with the exception of American Express with a 1-year dip in 2017, all companies looks good, without any signs of a disruption of their investment moat.

Despite the strength of the traditional powerhouse of Visa, Mastercard and American Express, there seem to be a huge uprising from UnionPay.

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