Visa and PayPal Pulled Fintech Stocks Lower: Now What?
Visa's (V) sell-off accelerated when Amazon (AMZN) thought about switching credit card firms at its U.K. business. It does not like Visa's merchant rate and is open to finding another partner. PayPal (PYPL) is down by over $100 from its $300 peak. eBay (EBAY) may add more payment options, hurting PayPal's market share.
PayPal is especially at risk of some downside ahead. Apple Pay, Shop Pay, and emerging fintech companies are offering payment options. This will either squeeze PayPal's market share or hurt margins. PayPal is unlikely to cut its fees, so investors should expect share loss in the coming months.
Bank stocks like Wells Fargo (WFC) and Citi (C) did not fall as much as V or PYPL stock. The banks benefit from rising interest rates. They have a big network and a strong customer support group to capture a bigger slice of the online transactions market.
MasterCard, Visa, and American Express may need to lower fees charged to merchants. Alternatively, it would need to increase investments in supporting online transaction volumes. Already, those card companies strengthened their security to weaken fraudsters. New fintech firms like SoFi (SOFI) may need to increase expenses faster than revenue growth to match the security and customer support.
Wait for selling pressure in PYPL and V stock to ease before taking a full position.
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