NEW YORK, March 20, 2019 /CNW/ --Payment processing companies are seeing impressive growth and may present attractive investment options by providing diverse services.
- Changing technology and spending habits are forcing payment systems to change.
- New providers are emerging to challenge banks and old providers.
- By providing diverse services, these providers cater to a range of specific markets.
- Adaptable technology helps to future proof these innovations.
Net Element (NASDAQ:NETE) (NETE Profile) is capitalizing on this growing space by providing an integrated payment solution that includes online, mobile and smart point-of-sale payments solutions for merchants in diverse industries. Square Inc. (NYSE:SQ) is working with trends such as bitcoin and in-app payment. PayPal Holdings Inc. (NASDAQ:PYPL), the big name in the sector, processes over $155 billion a year in mobile payments. The process is still connected to the cash economy through systems such as the ATMs of Euronet Worldwide Inc. (NASDAQ:EEFT). Services being developed include shopping without a checkout and online fundraising, areas Global Payments Inc. (NYSE:GPN) is working on.
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Boom Times for Payment Processing
The first quarter of 2019 has seen payment processing companies continue their strong performance. It's a trend that reflects ongoing changes in the way payments are made and the way the industry works. Once dominated by banks, the payment industry is now a fractured and diverse sector, with businesses catering to the shifting desires of the millennial generation and to the specific needs of different consumer markets.
This means that payment processing companies must adapt fast to keep up with the times. From blockchain to security to contactless payments on the high street, the pace of change has been relentless and shows no sign of slowing. It's no longer enough for payment companies to respond to the latest trends — they have to be preparing for an unknown future as well.
The Millennial Market
At the turn of the millennium, payment processing was almost entirely driven by banks and the small number of companies supporting them. But in the years since, the market has been transformed, allowing newer companies such as technology-driven group Net Element (NASDAQ:NETE) to make its presence felt.
A number of factors have driven this change. One of the most obvious is the rise of the internet and online shopping. These online advances have created a need for online payment services, such as PayOnline, which allows retailers to quickly and easily get set up to take electronic payments. More recently, the options have extended to mobile payments, which have created a bridge between online and offline shopping, as consumers use internet-enabled phones to make payments on the high street.
Online shopping has contributed to the rise of a globalized economy, in which people are increasingly making payments across borders. Some newer payment companies such as Net Element have kept a strong focus on growing markets, where traditional payment systems are less developed and there is an even greater need and desire for technological solutions. And with prosperity rising in emerging markets such as China, the growth potential is huge.
Then there's the behavior of the millennial generation. An increasing number of consumers have grown up with electronic payments. These individuals are not just used to making transactions without cash — they prefer it. This attitude has created a space in which the domination of the banks has finally been broken, and companies with innovative electronic payment solutions can thrive.
A Diverse Industry Rising
From micropayments to macroeconomic trends, the whole market seems set to support and encourage the growth of payment companies. It's a shift that saw Net Element named as one of the top retail payment service companies in 2018, thanks to its ability to provide the services customers are seeking; the company has also made Deloitte's Fast Growth Companies list two years in a row (2017 and 2018).
The conversation around payment processing is no longer driven by banks. It's primarily the work of fintech companies, which are developing payment systems that work faster and more efficiently, and at lower costs. Making these payment options user friendly is crucial, as adoption is driven from the ground up by consumers.
The result has been a staggering rise in the value of some older payment technology firms but also the emergence of upstart contenders for the payment processing crown. By covering a range of electronic payments, these newcomers can quickly carve out important niches for themselves. For example, Net Element's mobile payments solution effectively turns mobile phones into point-of-sale devices through Unified mPOS, its Unified Payments subsidiary. The company also covers point-of-sale systems through subsidiaries such as Aptito and Restoactive, online payments through PayOnline, and end-to-end solutions through Tot Group, allowing it to profit from all areas of electronic payments.
Catering to Specific Markets
The business side of payments isn't the only piece of the process that has become fractured — the customer base has also been affected. Both individual customers and business customers seek solutions better tailored to their specific needs and desires, and the more agile companies are happy to help. Net Element has shown how this can work by catering to specific industries.
An example of Net Element's flexibility and agility is how it serves the U.S. events industry. Currently, this sector is worth hundreds of billions of dollars and employs millions of people. Large events have complex requirements, selling different sorts of tickets, tracking those sales, taking payments at events, and so on. The solution offered by Unified Payments, a Net Element subsidiary, caters to the unique needs of a large, established industry making seasonal sales for huge events.
Net Element is also eyeing other underserved industries to identify ways in which it can provide the services these sectors are searching for. By catering to specific business sectors, payment companies such as Net Element can ensure the satisfaction of their customers and distinguish themselves from the rest of the market.
One of the big challenges for payment providers is future proofing. So much has changed over the past 20 years, and that pace of development looks set to accelerate rather than slow. To ensure long-term survival, providers have to create systems that can adjust to changing habits, security concerns, technology and regulations.
This sort of flexibility is shown in Net Element's payments platform Netevia. A multichannel platform, Netevia provides end-to-end payment processing from multiple different inputs. By integrating with other payment platforms, it allows users to adapt to circumstances, while additional security and fraud prevention features help retailers to keep their payments and their customers' information secure.
The company also launched Netevia Light POS, a seamless and secure mobile payments acceptance software that operates on smart terminals by PAX technology. Combined together, Netevia Light POS and PAX's Android-based interactive smart payment terminals provide a robust, flexible, state-of-the-art solution that offers a convenient way to do day-by-day operations through a modern, accessible user interface and allows seamless transactions across multiple touch points.
Changing with the Financial Times
Different companies are adapting payment systems in different ways. Mobile payment provider Square Inc. (NYSE:SQ) is one of those that has made technology to help merchants turn their phones and computers into point-of-sale systems. This approach makes it easier to adopt electronic systems, both for businesses and for customers. Last year, the company worked on integrating bitcoin into its systems, as that experiment in online currency reached its peak, a move that boosted Square's share price. It has since announced a software development kit for in-app payments, which will allow the creators of apps to integrate Square's system for easy payments within those apps. This puts the company squarely at the heart of one of the decade's biggest technological and social trends.
No company better represents the changing face of payment than PayPal Holdings Inc. (NASDAQ:PYPL), whose email-based payment system has become ubiquitous. Last year, the company added to its capabilities through the acquisition of Hyperwallet, which had created a comprehensive payments solution including multicurrency payment distribution and disbursement options. PayPal processed $155 billion in mobile payments in 2017, and as a major player in the mobile payments game, it looks set to keep growing.
With a focus on making payments convenient and affordable, Euronet Worldwide Inc. (NASDAQ:EEFT) is showing the customer-friendly approach that payment companies need to prosper. Though digital payments are replacing physical ones, many people and transactions still rely on cash, and Euronet caters to payments of both types. The company provides ATM networks and has recently made a deal with a Spanish bank that will provide that bank's customers easier access to their funds.
Global Payments Inc. (NYSE:GPN) is experimenting with another approach to commerce in the form of unattended retail, or grab-and-go solutions. In this model, shoppers can select items from the shelves and walk out of the store without having to deal with checkout, and the process is predicted to be worth $13 billion within five years. As well as catering to retailers, Global Payments is supporting charity fundraisers through its Greater Giving software, which has recently been expanded to Canada. Online fundraising has become increasingly important in recent years, and companies such as Global Payments are making it easier.
By covering a range of needs, from cash to cryptocurrency and fundraising to fast checkout, payment processors are helping the global economy move forward at ever greater speed. Net Element appears to be one of the companies leading the way forward, and savvy investors are paying attention.
For more information about Net Element, please visit Net Element (NASDAQ:NETE).
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