December 6, 2022

Mastercard, Visa stand to benefit from real-time payment expansion(NYSE:V)

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Real-time payment (“RTP”) systems are “rapidly evolving into new use cases and revenue opportunities,” write Deutsche Bank fintech analysts lead by Brian Keane. At the heart of the burgeoning technology, Visa (NYSE:V) and Mastercard (MA) “are best positioned as the rails powering these players,” the analysts said in a recent report.

One area for potential growth in 2022 is disbursements. Only ~17% of all disbursements in 2021 were through RTP, up from 5.7% in 2020, according to research, the analysts said.

With the rise of the gig economy, companies are moving toward paying workers in real time. Beyond the gig ecosystem, employers may be willing to use real-time payments, particularly in service jobs, as an edge to attract and keep workers.

“Part of the interest comes from underbanked customers who may not have bank accounts, but have accounts such as Venmo, Paypal (PYPL), or CashApp (SQ), while others may prefer to use these apps due to hesitancy over giving out bank account details.” In addition to paying workers, disbursement use cases include insurance firms offering RTP.

The pandemic has only accelerated the demand for quicker access to funds, the analyst said. “Demand for use cases such as P2P (peer-to-peer), earned wage access, payroll, instant transfers, bill pay, disbursements, and cross-border account-to-account has taken off,” the report said.

Security, though, is a major concern as RTP systems expand. Identity verification is a challenge as the entire payment chain is responsible for verifying payors’ and payees’ identities.

The increased competition in RTP should be a benefit for Visa (V) and Mastercard (MA) as more players are likely to use either company’s payment rails. “V/MA are taking share of FinTech, FI (financial institutions) and payment processor volumes by investing in the infrastructure to support RTP expansion,” they wrote.

See how fintech/payment stocks rank by Quant, SA Authors, and Wall Street ratings in this table.

Last October, the Wall Street Journal reported that the U.S. Department of Justice is examining Visa’s (V) relationship with large fintech firms as part of an antitrust investigation.