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Charging Ahead: The Future of Digital Credit

07/08/2020 5:00 am EST

Focus: TECHNOLOGY

Jon Markman

Editor, Tech Trend Trader, The Power Elite, & Strategic Advantage

In the future consumers will apply for, and receive credit in seconds. It’s going to happen quickly and will change everything, asserts Jon Markman, growth stock expert and editor of Strategic Advantage.

Transactions will be more secure, leading to bigger profits at the banks and financial institutions that issue credit. Innovations like machine to machine payments will become possible.

One day, software in your car will pay for parking or refueling. Everything will be digital. Investors need to be ready. Companies like Mastercard (MA) and Visa (V) are obvious winners. These companies are the gatekeepers. They earn a small but durable fee from every transaction within the system.

The big opportunity for investors, however, is the firms helping banks and credit unions move quickly into the digital age. Thousands of local financial institutions will need online banking and payment software upgrades to take advantage of this big trend.

They will need bespoke mobile applications to move from dip and swipe, to tap and pay. Jack Henry & Associates (JKHY) and Fiserve (FISV) build systems to help banks manage payments online and through mobile applications.

Jack Henry began life in 1976 as a tiny software company. The founders operated out of rented space in a small engine repair shop. They helped a handful of regional banks control risks and manage regulatory filings.

Today the Missouri company services 9,000 financial institutions and has $1.6 billion in annual sales. Its online banking infrastructure is state-of-the-art and perfectly suited for thousands of smaller regional banks trying to embrace the digital future.

For 35 years Fiserve has been helping all of the rest. Its software has been the backend of choice for leading financial institutions. The Wisconsin company in 2019 committed to getting even bigger.

The acquisition of First Data Corp., one of the world’s leading payments providers, created a behemoth. Revenues surged to $10.2 billion, a 74% bump over the previous year.

Both firms have the tools, scale and the standing with core customers to take leadership roles in the coming payments revolution.

The pandemic and the need for online banking has made customers acutely aware of the need to sharpen their digital game. Widespread tokenized credit and contactless payment will speed development even further.

Something really big is happening with credit. This is a huge opportunity for investors to get in on the ground floor. Jack Henry, Visa and Mastercard are all buyable now for growth investors with a time horizon of six months or more.

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