Looking ahead to 2024 for the fintech payment sector, 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 leg of growth for payment companies,” and “value-added services are what drive merchants to platforms, not the simple ability to accept or reject a payment,” BTIG analyst Andrew Harte wrote in a note to clients.
He highlights Buy-rated Lightspeed Commerce (NYSE:LSPD), Shift4 Payments (NYSE:FOUR), and Flywire (NASDAQ:FLYW) as payment stocks that can grow revenue independent of consumer spending trends. Shift4 stands out as BTIG’s top pick.
Harte sees three major themes in fintech payments for 2024: merchants’ ability to meet changing consumer payment preferences; commerce continuing to globalize; and the importance of improving efficiency for both fintechs and merchants.
As the use of cash and credit and debit cards is expected to decline, the ability to accept digital wallets and account-to-account payments will be key. “We think companies that own their payment networks such as Shift4 (FOUR) and Flywire (FLYW) will be beneficiaries of payment preference shifts.” For example, FOUR has demonstrated the ability to accept 100+ payment methods and 160+ currencies, Harte said.
Meanwhile, Flywire (FLYW) has said it can plug real-time payment rails into its network if there’s customer demand.
Shift4’s (FOUR) acquisition of Finaro gives it acquiring, foreign exchange and banking capabilities across Europe and the U.K., with additional licenses in Southeast Asia and Japan.
Flywire (FLYW) global payment network allows businesses in several verticals to conduct international commerce in more than 240 countries and 140 currencies. The company should benefit as cross-border travel becomes more accessible with COVID restrictions now completely lifted, Harte said.
Lightspeed (LSPD), with a client base skewed toward small- and medium-sized businesses, has acquired four international businesses since 2019, to expand its total addressable market in addition to bolstering software capabilities. However, “we see the potential for LSPD to leverage its global footprint (1/2 of clients are outside of North America) as a selling point in the future.”
“POS (point-of-sale) software and payments companies are well positioned to help merchants improve operations and drive customer engagement, both of which will be crucial if consumer trends prove to be soft in 2024,” Harte said.
He expects Flywire’s (FLYW) proprietary payments platform and vertical-specific software to attract new customers seeking to solve payment complexities. Its education and healthcare verticals are attractive as more people typically go back to school in times of economic weakness, he said.
“We see LSPD as able to grow in a potentially weaker 2024 macroeconomic environment, even despite its SMB retail skew, as the company executes on its Lightspeed Payments mandate, which remains only 25% penetrated while targeting 100% penetration of eligible customers by the end of the year,” Harte wrote.
While BTIG rates PAR Technology (NYSE:PAR) and Toast (NYSE:TOST) as Neutral, he sees those stocks as “well positioned to add enterprise and SMB customers, respectively, as their software should appeal to restaurants looking to improve operations.”