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Looking ahead to 2024 for the fintech payments industry, BTIG is urging investors to focus more on a company’s ability to add customers than the amount of payment volume it processes.
“Consumer payment volumes are just one step in the growth for payment companies,” and “value-added services are what drives merchants to platforms, not the simple ability to accept or decline a payment,” BTIG analyst Andrew Harte wrote in a note to clients.
He highlights Lightspeed Commerce with a buy rating (NYSE:LSPD), Shift4 Payments (NYSE: FOUR), and Flywire (NASDAQ: FLYW) as payment shares that can grow revenue regardless of consumer spending trends. Shift4 stands out as BTIG’s top choice.
Harte sees three key themes in fintech payments for 2024: merchants’ ability to meet consumers’ changing payment preferences; trade continues to globalize; and the importance of improving efficiency for both fintechs and merchants.
Payment methods
With the use of cash, credit and debit cards expected to decline, the ability to accept digital wallets and account-to-account payments will be critical. “We believe companies that own their payment networks, such as Shift4 (FOUR) and Flywire (FLYW), will benefit from shifts in payment preferences.” For example, FOUR has demonstrated the ability to accept more than 100 payment methods and 160+ currencies, Harte said.
Meanwhile, Flywire (FLYW) has said it can connect real-time payment rails to its network if there is customer demand.
Global reach
Shift4’s (FOUR) acquisition of Finaro gives the company acquisition, foreign exchange and banking capabilities across Europe and the United Kingdom, with additional licenses in Southeast Asia and Japan.
The global payment network Flywire (FLYW) allows companies across industries to trade internationally in more than 240 countries and 140 currencies. The company should benefit as cross-border travel becomes more accessible with COVID restrictions now fully lifted, Harte said.
Lightspeed (LSPD), with a customer base primarily focused on small and medium-sized businesses, has acquired four international companies since 2019 to expand its total addressable market in addition to strengthening its software capabilities. “However, we see the potential for LSPD to leverage its global footprint (half of its customers are outside North America) as a selling point going forward.”
Efficiency drive
“Point-of-sale (POS) software and payments companies are well positioned to help merchants improve their operations and increase customer engagement, both of which will be crucial if consumer trends prove weak in 2024,” Harte said.
He expects Flywire’s (FLYW) proprietary payments platform and industry-specific software to attract new customers looking to solve payment complexities. The education and health care sectors are attractive because more people typically return to school during times of economic weakness, he said.
“We see LSPD able to grow in a potentially weaker macroeconomic environment in 2024, even despite its SMB retail skew, as the company executes on its Lightspeed Payments mandate, which is still only 25% penetrated while targeting 100% penetration of eligible customers by the end. of the year,” Harte wrote.
While BTIG assesses PAR technology (NYSE:PAR) and Toast (NYSE: TOST) as a Neutral, he sees these stocks as “well positioned to add enterprise and SMB customers, respectively, as their software should appeal to restaurants looking to improve their operations.”