For much of the past decade, there has been little doubt over the transition to the cashless economy, fueled by the rise of digital-only payment apps such as PayPal and Revolut. However, while this transition is proceeding apace, we’re now starting to see some serious bumps in the road.
Much of this has stemmed from the general market crash that has swept through the tech titans that became household names in the 2010s. At first, some thought this would be limited to the pandemic-era darlings that now find themselves facing collapsing demand, such as Zoom or Peloton, which have seen their stock prices collapse. However, it’s now clear that the malaise is much wider.
Leading payment finance apps like PayPal (which also owns Venmo) and Square have seen their stock prices fall to a fraction of their former value in 2022, with zero indication that things will turn around in the near future. So, were the predictions of a financial future dominated by payment apps too premature? Let’s take a closer look and find out.
Why has the market turned sour?
First off, it’s worth looking at why the stock market suddenly went bearish on payment apps. There are no major payment apps or even fintech stocks today that are not taking a historical beating on the stock market. Much of this is related to macroeconomic factors that are not only affecting payment apps.
The era of cheap money is well and truly over, meaning that investors are now pulling out of tech companies that promised growth over profitability. As a result, many of these high-growth payment apps that, despite their vast customer base, have never turned a profit, now find that the tap has been turned off. However, that’s not the whole story.
It would be fair to say that demand for these services is simply not what it used to be. Consumers no longer have an interest in having a dozen different payment apps on their phones. Meanwhile, the wider reopening of the economy means that cash and card are back in vogue like never before, even if businesses have adapted to accommodate payment apps on a massive scale.
Meanwhile, the decision of major providers such as PayPal and Square to enter the murky waters of cryptocurrency and cheap credit lines has proven to be disastrously timed, as crypto markets have imploded and interest rates are skyrocketing. While the need for digital payment apps has not vanished, the biggest market players have arguably overplayed their hands.
Propped up by select industries?
That being said, some high-growth industries have come to adopt mobile payment apps as core infrastructure. This factor alone will probably keep many payment apps afloat and with a purpose, even during more adverse market conditions.
E-commerce is one important example, but one that should not be overstated. While many smaller platforms and Etsy stores rely on apps to facilitate payments, debit and credit cards are still by far the most popular payment methods on sites such as Amazon, Target, and eBay.
Conversely, some high-growth industries see payment apps as central to their success. A standout example in this regard is the multi-billion dollar online casino business. Here, many customers prefer to make wagers and withdraw winnings via quick, discreet payment apps, especially since this is often the quickest way to get winnings into your bank. For example, this online casino proudly advertises that it accepts apps such as PayPal, Neteller, and Skrill. Meanwhile, social media shopping platforms such as TikTok Shop or Instagram Cart rely almost exclusively on these apps to facilitate on-site, instant purchases.
The future of the payment app
While the markets might be nervous about the prospects of payment apps, the hard evidence suggests that they are not going anywhere. Many will agree that their promise was somewhat overhyped during the funding boom times of the 2010s.
Now that this era is over, it could be an opportunity for the biggest market players to take stock and pivot towards selling the core services their customers need and want the most, instead of trying to constantly expand.
Chances are, you currently have over one payment app on your phone. Whether these will still be operating in two or three years is another story entirely, but the convenience that they offer will never go out of style.