5 Payment Stocks That Earn a Fee Every Time You Swipe
Key PointsVisa handled 74.2 billion transactions in its latest quarter, up 10% year over year.
Visa, Mastercard, American Express, PayPal, and Capital One all generate revenue from the payments made by consumers. Visa processed 74.2 billion transactions in the three months ending September 30, a 10% increase year-over-year. However, the companies differ in their level of risk and services provided. Some, like Visa and Mastercard, merely facilitate the payment network, while others, like American Express and Capital One, also issue cards and lend money.
Visa and Mastercard trade at around 28 times analysts' earnings estimates for 2027. Visa's net revenue for the fourth quarter rose 13% to $12.1 billion, or about 16 cents per transaction. Mastercard's gross dollar volume climbed 7% in the third quarter, with value-added services accounting for 41% of its net revenue. American Express charges merchants a fee and also lends to cardholders, with discount revenue at $10.2 billion and net interest income at $4.9 billion.
PayPal generates revenue as a percentage of its payment volume, which has shrunk for three quarters to around 1.58%. Capital One primarily earns from interest income, with a fast-growing network and reissued debit cards on Discover's network.
The valuation gap among these stocks appears to reflect the risk associated with each company's business model. American Express trades at around 16 times 2027 earnings estimates, while Visa and Mastercard trade at about 28 times. For those seeking a simple fee on every payment, Visa and Mastercard are worth considering, with Visa being the stronger investment at $425, near its 52-week high.
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