How to CASH IN on the cashless WORLD
As digital payments and online shopping soar in lockdown . . .
BrITaIN’S cash system is on the brink, with increasing numbers of businesses refusing coins and notes due to virus fears.
For the millions who still rely on paper money to shop and pay the bills, the idea of a cashless world is desperately worrying.
While Money Mail will keep fighting to protect the nation’s access to cash, the move towards digital payments and online shopping could prove a lucrative opportunity for investors.
Most payments are now made by debit or credit card, with the use of cash falling 15 pc last year, figures show. Some 7.4 million people now use it only once a month, or not at all — more than double the number two years ago, according to trade body UK Finance.
The pandemic has further fuelled the decline of cash, with aTM withdrawals down 55 pc during lockdown. research by digital business bank amaiz suggests half of all retailers plan to go cashless (or have done so) due to the virus.
Meanwhile, online shopping is expected to remain popular, with internet sales up by nearly a third last month compared to the same period last year, according to the IMrG Capgemini Online retail Sales Index.
Guy de Blonay, fund manager at Jupiter asset Management, says: ‘It’s the online payment providers that are the winners from the transition to cashless societies globally, accelerated by Covid-19.’
Mr de Blonay’s fund, Jupiter Financial Opportunities, invests in a host of firms in the payment sector. His biggest holding is Global Payments, a U.S. card payment processing company, which provides systems and develops the software used by businesses to accept payments.
Mr de Blonay says: ‘ Global
Payments is not immune from the decline in retail sales in the shortterm. But, longer-term, it should benefit from the acceleration of the transition to cashless. Its omni-channel offering [powering online and physical payments] and software are also a key element of differentiation in addressing the new needs of small businesses.’
The Jupiter fund also invests in Mastercard and visa, which are also benefiting from the digital payment trend. In the U.S., visa recently reported a 150 pc increase year-onyear in the use of contactless cards. and, after the limit increased from £30 to £45 during lockdown, experts expect contactless spending in the UK to also increase.
If you had invested £10,000 in the Jupiter fund five years ago, it would now be worth £17,470.
James Thomson’s rathbone Global Opportunities fund holds Mastercard and visa, as well as online payment provider PayPal (the latter recently reported a record number of new account openings in its first quarter as well as a 25 pc uplift in transactions).
There are also lesser-known firms working behind the scenes in the payments industry. For example, digital payment company Tenpay links mobile apps with its payment system and is used widely via WeChat — a smartphone messaging app similar to Whatsapp.
Mr Thomson, who invests in Tenpay’s parent company, the Chinese internet giant Tencent, says: ‘Its main advantage is that WeChat has more than 1.2 billion active users.’ rathbone Global Opportunities has turned £10,000 into £21,700 in five years.
In europe, Dutch-based online payment provider adyen has a unique technology that makes it possible for merchants to process transactions in- store as well as online. Worldline, a French company, is now the world’s fourthlargest payment services provider; Nexi in Italy is a smaller rival.
Mr de Blonay, who holds all three in his fund, adds: ‘ Worldline and Nexi can bring the benefits of innovation to small merchants that remain under- served by banks or e-commerce players.’
In the U.S., digital payments group Boku allows users to pay bills using their mobile phone. Its share price jumped last week after it announced a partnership with PayPay, Japan’s leading eWallet and Qr code payment service.
To invest in Boku, Darius McDermott of FundCalibre suggests Marlborough Special Situations which has turned a £10,000 investment into £14,400 over five years.
He also tips axa Framlington Global Technology which invests in PayPal and visa as well as apple in its top ten holdings.
Jeremy Gleeson, manager of the axa fund, points out that apple Pay has been a success with consumers, though it’s not been hugely profitable yet. With the launch of the apple Card in the U.S. (a credit card that’s linked to apple Pay and built into the Wallet app), he expects it to prosper.
The fund has turned £10,000 into £29,320 in five years.