For the first time ever, U.S. holiday spending hit a record of $126 billion in online sales. Through a backlash to what experts call “frugality fatigue”, consumers are entered the holiday season more willing to pull out their wallets, to the benefit of payment processors such as American Express Company (NYSE: AXP), Discover Financial Services (NYSE: DFS), Mastercard Incorporated (NYSE: MA), Visa Inc. (NYSE: V), and NetCents Technology Inc. (CSE: NC) (OTC: NTTCF).
According to an annual holiday shopping survey conducted by Discover, 25% of consumers are planning to spend more this holiday season than last year. A big boost is coming from both Millennials and Gen-Z, which anticipate bumping up their spending 35% and 33% respectively.
How consumers spend on the season may be different this holiday season than others, as online spending is expected to rise in the US by 14.8% to $124.1 billion. While online merchants stand to gain the most among retailers, the big winners across the board look to be payment processors, from mainstream credit cards, to innovative cryptocurrency-based platforms.
Those who expect to use credit cards to pay for most of their holiday gifts jumped to 38% this year—up from 32% in 2017. Less than a quarter (24%) plan to use debit cards to pay for most of their gifts, and 20% will primarily use cash.
As the largest segment of shoppers, credit card shoppers are being incentivized by rewards. More than half (54%) of those who favor credit cards for holiday purchases said that earning rewards is the driving factor, up from 42% last year.
Whether that comes from mainstream credit cards, or upstart apps and comprehensive platforms like NetCents, consumer loyalty is growing through ease-of-use and security.
The advent of blockchain and cryptocurrency technology is helping to seamlessly deliver secure, reliable, and low-cost digital payments services. NetCents meshes both cryptocurrencies, and payment processing options-even with its own cryptocurrency credit card that works wherever Visa and Mastercard are accepted.
CONVENIENCE BREEDS CONSUMPTION
"The holidays are the busiest shopping season of the year and our goal is to make it as simple and seamless as possible for our cardmembers to earn rewards every time they use their Discover card," said Laks Vasudevan, Discover’s vice president of card programs, strategy and marketing in the survey’s press release. "Rewards are a major driver for our cardmembers, which is why we help maximize their earning potential during the holidays by aligning our 5% cashback program with popular seasonal categories like Amazon.com and wholesale clubs."
Beyond just rewards, younger shoppers are looking for convenience with their shopping, with 80% of Gen-Z shoppers planning to use their mobile device for holiday gifts, along with 73% of Millennials, and 62% Gen-Xers. Two-thirds of Gen-Z and Millennials are planning to do so for most or all their shopping through these devices.
However, despite the convenience of shopping with your thumbs, the concern for security cuts across all generations.
Both consumers and merchants alike are looking for safe, and versatile methods of payment. The vast majority (90%) of Discover’s survey respondents say they take some measure to protect themselves from identity theft or fraud. But merchants have a whole other problem to worry about-chargebacks.
COMBATING SECURITY CONCERNS WITH CRYPTO CONVENIENCE
An upstart blockchain/cryptocurrency transaction platform from NetCents Technology Inc. (CSE: NC) (OTC: NTTCF) is looking to make a splash this holiday season, with its rapidly growing portfolio of merchant clients, and user base. Part of the appeal of the NetCents platform for merchants, is its proactive approach against both fraud and chargebacks—a problem that has reached $40 billion per year.
Backed by its blockchain/multichain software, NetCents not only gives merchants a much more secure method to interact, buy it also drastically lowers transaction costs.
For example, a low-risk merchant on average typically faces a merchant fee between 3.5-5.5%, whereas a higher-risk merchant gets hit with a rate of 5.0-10.0%.
NetCents’s counter is to drastically reduce risk at both ends of a transaction, and plummet the cost—with a merchant fee of only 1.99%. When it comes to cryptocurrency transactions for merchants, that gap widens even more.
Cryptocurrency payments are currently processed and a fee is tacked on based on the size and complexity of the transaction. Even the most popular cryptocurrency in the world, Bitcoin (BTC), comes with a transfer cost between the user and the merchant that is extremely high.
It’s not unusual for a product costing $100 bought with BTC to result in a transaction fee to the user of 28%. This is unworkable for most transactions.
That same transaction through the use of NetCents will only cost the user 2.25% (a savings of 25.75%), leading to a game-changing shift in the cryptocurrency space.
Lastly, payout on transactions can take up to 7 business days through traditional platforms. NetCents has put quick settlement at the forefront of its pitch to merchants, resulting in settlements appearing days earlier than traditional methods, if not instantly.
But NetCents users are not going to be restricted to only merchants that are set up with the platform. NetCents has unveiled a cryptocurrency credit card that is accepted wherever Visa and MasterCard are, which would use funds from the user’s NetCents eWallet, that is capable of holding a vast array of cryptocurrencies including the company’s proprietary rewards-based NCCO currency.
Today’s shoppers are evolving to use digital payment wherever they can. The NetCents platform is a glimpse at the future that could bring together the cryptocurrency markets with the mainstream credit card payment processors.
HOLIDAY BENEFITS FOR CREDIT CARDS
American Express Company (NYSE: AXP)
Bouncing back from a decline in top line in 2015 and 2016 (after losing its biggest client, Costco), American Express’ revenues have shown a reversal, growing 8% in 2017 and 11% in the first nine months of 2018. In Q3 2018 the company recorded its sixth consecutive quarter of adjusted revenue growth of at least 8%. Built off its strong brand name and continued efforts towards new growth verticals and a digital shift, American Express is expected to have strong revenue growth with the current strong economy driving consumer spending power.
Discover Financial Services (NYSE: DFS)
As one of the major card issuers in the US, Discover is a leading innovator in the credit card industry. The company continues to launch new products tailored to suit specific customer needs in order to attract new customers in its card business. Through forging alliances and partnerships, card sales volume increased at an average of 4% in each of the last four years (2013-2017). In the first nine months of 2018, Discover grew 12% year over year. Company earnings for 2018 are expected to grow 30.9% compared with the industry’s growth of 21.6%.
Mastercard Incorporated (NYSE: MA)
Given its solid market position, Mastercard is poised for growth, driven by ongoing expansion and digital initiatives plus significant opportunities from a secular shift toward electronic payments. The major credit card giant has grown through a revenue CAGR of 11% from 2012-2017. In the first nine months of 2018, Mastercard has seen an increase of 21% , with high teens revenue growth expected for the year. Mastercard’s earnings for 2018 are expected to grow at 40% compared with the industry’s expected growth of 20%.
Visa Inc. (NYSE: V)
Last holiday season and e-commerce growth drove Visa’s earnings for Q4 2017 with healthy growth. The same is expected this year. Visa has consistently delivered double-digit revenue growth in the past few years, while also increasing its dividends over the past 10 years. The company’s Q3 fiscal 2018 increased to $5.24 billion, up from $4.57 billion a year prior, for a growth rate of 15.8% year over year. Over the past quarter, Visa’s adjusted earnings per share increased 39% year-over-year to $1.20.
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