With many stores refusing to accept notes and coins for hygiene reasons, the Covid-19 crisis may have seriously accelerated the trend towards becoming a cashless society.

Cash has been overtaken by contactless payments in recent years—a quick waft of the credit card over the reader to pay a takeaway coffee has become the defacto payment method in UK towns and cities.

Meanwhile, the growth of online shopping has been a major boon for payments disruptors such as Paypal (PYPL), Apple (AAPL) and Alphabet (GOOG).

And with millions of people stuck in their own homes, and shops and restaurants closed, it is the big global payment players which look set to benefit most of all.

Wide-moat Visa (V) and Mastercard (MA) take a small cut every time we pay with plastic or use their payment terminals.

Of course, overseas transactions are down with the travel ban still in place, but a boom in online sales is taking up the slack, says David Older, head of equities at Carmignac—and manager of the €10 billion ($17 billion) Carmignac Patrimoine fund, which has a Morningstar Analyst Rating of Neutral.

Rather than just focus on the dominant card companies, which are rated as fairly valued by  Morningstar analysts, he is looking at the wider payment universe, and that includes a number of European companies—and even an Argentinian online auction house.

Stock table

Games and tunes

Noticeable consumer trends in lockdown such as streaming and gaming help the investment case for card payment companies, Older argues.

Computer games are a case in point: the trend towards gamers buying digital products rather than physical games had begun in earnest before the lockdown.

But with people unable to go to the shops, gamers have had no choice but use their cards—and Older argues that once they have stored these in platforms like Nintendo e-shop, they will continue to use them. (The Japanese firm is the 10th biggest holding in the Carmignac Patrimoine fund.)

Away from Mastercard and Visa and Mastercard, he owns a number of less well-know names, many of which have performed ahead of the market so far this year.

Among these he favours Dutch firm Adyen (ADYEN), which has built payment systems for the likes of Uber (UBER) and Spotify (SPOT). Despite some share price weakness in the March sell-off, Adyen shares are up 16 per cent in the year to date.

Older also holds France’s Worldline (WLN), a company that processes online transactions, as well as Argentina's online auction site Mercado Libre (MELI), which is listed on the Nasdaq and in Buenos Aires. 

Among US companies, he favours Tradeweb Markets (TW), a company that develops electronic marketplaces for bonds and derivatives.

Cash running out of time

Older argues that, beyond the immediate crisis when consumer trends have been changed dramatically, a lot of these companies involved in ecommerce—whether in payment processing or providing content—should be able to thrive even in recession.

And the outlook for cash remains bleak: in the UK, where the adoption of contactless payments has been high, cash transactions make up less than 20 per cent of the overall total, according to the British Retail Consortium.

That percentage is falling every year and the coronavirus crisis is only likely to accelerate this trend, even when lockdown measures start to lift.

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