One area of the share market which I think has a lot of potential is the payments industry.
Cash and credit card usage has been declining over the last few years and several companies are aiming to take advantage of this by disrupting the industry with innovative solutions.
Two ASX payments shares which I think are destined for big things are listed below. Here's why they could be great long term investments:
Afterpay Ltd (ASX: APT)
This payments company is rapidly disrupting the industry with its buy now pay later offering. Its success has been so great, the word Afterpay is used by many as a verb now for buying something and paying for it in instalments. In addition to this, with millions of consumers using its platform in the ANZ, UK, and U.S. markets, it has become a must have for retailers.
There were concerns that Afterpay's business model could struggle during tough times. Not only have sales remained very strongly, but its bad debts have remained stable during the pandemic. The has been driven by the flexibility of its model, which has allowed it to lower its risk without stifling its growth. In light of this and its global expansion opportunity, I believe Afterpay is well-placed to be a long term market beater.
Pushpay Holdings Group Ltd (ASX: PPH)
Another payments company which I think is destined for big things is Pushpay. It is a growing donor management platform provider for the faith, not-for-profit, and education sectors. Pushpay's innovative solutions simplify engagement, payments, and administration, allowing users to increase participation and build stronger relationships with their communities. It also means the day of handing around the hat in church for cash donations are over.
I've been very impressed with its performance over the last few years and particularly in FY 2020. Earlier this month it reported a 33% increase in operating revenue to US$127.5 million and a 1,506% jump in EBITDAF to US$25.1 million. Pleasingly, management is confident there will be more strong growth this year. It expects to double its operating earnings in FY 2021 despite the coronavirus pandemic. Looking further ahead, it is aiming to capture a 50% share of the medium and large church segments. This is estimated to be worth US$1 billion in annual revenue. Given the quality of its offering and its recent acquisition, I believe it can achieve this goal and drive strong earnings growth over the next decade.
