The payments sector was presented with two very different pictures this week. Visa said consumers were happily spending, while French payments company Worldline plunged after warning about an economic slowdown in Europe.
Firstly, there’s a darkening macro environment globally. Worldline picked out Germany as a particular pain point but investors seem to fear it could just be a sign of things to come globally. Consumer spending has been resilient in the U.S., something that may not last if it the Federal Reserve keeps interest rates higher for longer. Fears of a recession haven’t disappeared.
Secondly, there are questions around the business model of a lot of payment stocks. Visa and its rival Mastercard still enjoy a huge competitive advantage around their card networks. The same isn’t true of payment processor upstarts such as PayPal and Block, which depend on e-commerce spending, or buy now, pay later specialists like Affirm Holdings , which also dropped on Wednesday.
Meanwhile, fast-growing disrupters also started looking less attractive. Private payments company Stripe sold shares at a valuation of around $50 billion in March, slashed from $95 billion in 2021, according to The Wall Street Journal. Its rival Adyen fell nearly 40% in a single day in August when the Dutch company said tougher competition in North America caused it to miss growth expectations.
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