Payment Service Sector Back in the Spotlight in 2020
The author is an analyst of NH Investment & Securities. She can be reached at michelle.cho@nhqv.com. -- Ed.
Amid strengthened social distancing in 4Q20, offline payment volume declined and overall credit card transaction volume growth stagnated. Nevertheless, the ratio of PG service usage to total credit card transaction volume remains on the rise.
Payment services moving forward smoothly
According to analysis by consumer research institute Consumer Insight, the online shopping portion out of total consumption rose to 62% in November, up from the 58~59% level seen before the implementation of social distancing. Meanwhile, online shopping transaction volume growth continued to clock at +20% y-y.
Credit card transaction volume growth stagnating
With social distancing still in place and outdoor activity being restricted, offline payment and credit card usage growth remain limited. Nevertheless, the ratio of PG service usage to total credit card transaction volume continues to grow, indicating that the paradigm shift towards contactless payment remains intact.
Considering lagging credit card payment growth, we slightly revise down our sales projection by an average of 1% for the three fintech players under coverage. We also trim down 2021F EPS and our TPs by 7% and 4%, respectively, on average.
Share prices crawling, but growth potential remains intact
In 4Q20, the shares of domestic payment service providers underperformed the Kosdaq by 12%p and other sectors by 10%p. After skyrocketing in 1H20, foreigner’s net buying into the sector turned to stagnation, which in our view is a result of investors constantly moving to new sectors in the Kosdaq. However, we still positively view the upside potential of payment services, given the sector’s ongoing growth and robust profitability.