Not even a potential economic downturn is stopping U.S. consumers and savvy millennials from shifting more to phone-assisted payments in the coming year.
There is a general consensus on Wall Street that payment stocks can weather a slowdown. Even Goldman Sachs analysts, who are taking a more defensive posture on stock selection within payments and IT services, expect lower unemployment and wage increases to drive growth in consumer spending.
Payment networks — think PayPal — have outperformed during periods of slow or declining consumer spending in the past and muted revenue growth is likely if retail sales slow, but results would be somewhat better than during the slump of 2008, Goldman analyst James Schneider wrote in a note.
A slowdown would have a bigger impact on MasterCard, the world’s second-largest payments network, than Visa, according to the analyst.
“We remain constructive on the outlook for U.S. consumer spending in 2019 and are using 5 percent retail sales growth (in line with preliminary 2018 results) as a baseline for our 2019 estimates,” Schneider wrote.
“Lower gas prices and volatility in emerging markets are likely to pose headwinds to growth on the margin for our companies with global exposure.”
Consumers around the world are shifting to electronic payments for faster and more convenient transactions, a trend that’s disrupting banks.
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Two of the biggest U.S. banks, Goldman Sachs Group and Wells Fargo, said earlier this year they were looking into consumer finance for a share of the $183 billion in fees and interest tied to credit-card lending.