Managers Target Digital Payment Stocks As Move To Cashless Society Accelerates

The annual Access to Cash Review, published last week, revealed cash is now only used for a third of transactions in the UK, down from almost two-thirds a decade ago, and forecast to fall as low as one tenth of transactions within the next 15 years. 

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Similarly, a recent GlobalData survey showed a reduction of 37% in the total amount of cash spent in the UK from 2012 to 2017, with the firm predicting a further 35% decline by 2022.

While the UK is by far the largest user of digital payments in Europe, according to comparison website Merchant Machine, this is a global phenomenon.

According to China's Ministry of Industry and Information Technology, mobile payment transactions in the country reached a record $12.8trn from January to October 2018.

Similarly, the impact of demonetisation in India has led to the rapid expansion of digital payments in the country.

Manager of the AXA Framlington FinTech fund Vincent Vinatier explained there are three main drivers in building a cashless society.

Firstly, the demographic profile of a market, with younger populations accelerating the trend.

Secondly, infrastructure, which is particularly relevant in many emerging markets, where traditional banking infrastructure such as ATMs have been "bypassed", he said.

Finally, political will, with countries "trying to increase their tax take, while reducing the amount of money going into the informal economy, which is really helped by moving to digital transactions".

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In efforts to benefit from the global transition from cash, Vinatier allocates to 'payment rails' such as Visa and Mastercard where revenues are driven by growth in volume of digital payments.

Vinatier said: "Visa is one of the companies at the centre of this because it provides the payment rails that people and firms, including some of the newer and more advanced companies, are using."

In addition, the fund is investing in payment solutions firms like Worldline, which provide specialised IT systems for retailers and other sectors, he explained.