One November evening in 2016, India’s prime minister shocked his nation with a surprise announcement to pull much of the country’s high-value currency notes out of circulation.
As much as $320 billion in money was impacted immediately. The goal was to jump-start a shift toward a cashless society with digital payments.
When the dust settled, very few of the canceled notes were ever actually turned in, and digital payments didn’t take off as intended.
But what the government couldn’t achieve, the pandemic did. Digital transactions in India reached their highest level ever in July due to two unavoidable effects of the pandemic:
No. 1: Social distancing and shelter-in-place orders have driven the use of digital banking and triggered a huge surge in e-commerce.
No. 2: Consumers are concerned about handling physical currency that may be contaminated with the coronavirus.
And it’s not just India.
Countries around the world are experiencing a sharp increase in digital transactions thanks to the pandemic:
- Millions of new users have downloaded popular peer-to-peer payment apps just in the past couple months. According to Apptopia, net new installs were up 38% just in May compared to last year.
- PayPal Holdings Inc.’s (Nasdaq: PYPL) digital wallet Venmo processed $37 billion in payments in the last quarter, a 52% increase from last year.
- Square Inc.’s (NYSE: SQ) mobile payment platform Cash App saw gross profits surge 167% from last year during the most recent quarter. Electronic deposits of government stimulus checks also provided a boost to results.
But this isn’t merely a temporary blip that will reverse itself once the pandemic abates. PayPal executives even went so far as to say that the “death of cash” was upon us, given the trends being driven by the crisis.
Just as Ted and I have shown you many times recently, including in one article last week … the pandemic is merely accelerating trends that were already in place.
And here is yet another opportunity to reap substantial gains…
The Death of Cash
Digital payments have numerous advantages over cash transactions.
But it really comes down to cost and accuracy.
From a cost standpoint, it costs money to print money and checks. There are also expenses to manually send and process a check. And digital transactions allow for real-time tracking of cash flow and expenses.
In terms of accuracy, check processing requires accounting reconciliation to confirm the figures are correct. That often turns into a costly manual process instead of an automated solution.
That’s downright archaic by today’s standards.
Due to these benefits, the value of digital payment transactions across the world is expected to swell to $6.7 trillion in just three years … a gain of 63% from last year:
Yet those forecasts don’t even include the impact from the pandemic, where the digital boost has been an absolute profit windfall for companies providing these services.
You gain exposure to companies providing digital payments with the ETFMG Prime Mobile Payments ETF (NYSE: IPAY) to profit from this boom today.
You can also find a few exchange-traded funds (ETFs) touting exposure to “fintech,” or financial technology. That’s a broad term that captures digital payments, but other financial services as well.
But IPAY is the only ETF focusing solely on the digital payments industry … the segment that benefits the most from the lightning fast shift toward a cashless society.
Research Analyst, The Bauman Letter