Investing in the “Plumbing” of Global Finance

[Intelligent Income Daily]( Welcome to Intelligent Income Daily, the free newsletter from wealth and income expert Brad Thomas. In it, Brad and his team share the safest, most reliable ways to earn and grow your income in any market condition. You can find all past issues [here](. And if you have any questions, please contact Brad and his team [here](. Investing in the “Plumbing” of Global Finance By Brad Thomas, Editor, Intelligent Income Daily About 12 years ago, I flew to Spain to rent a BMW motorcycle to ride across Europe. In the end, it turned out to be a great trip. But it didn’t start out that way… Stepping off the plane, my checked bag didn’t show up, but I had to pick up the motorcycle before the shop closed for the weekend. So, I just rode around Valencia, Spain, hoping it would arrive. I eventually stopped at a café to scrape the rust off my Spanish. Whatever I ordered was about 15 Euros according to the menu. But when the bill came, it was 20. “No tipping required” was about the only thing I knew about Europe besides that the wine was good, so this surprised me. The waitstaff didn’t get a tip. But the government did. It’s a value-added tax or VAT. The Spanish government collects a hefty 21% every time someone buys a coffee, car, and anything in between. You don’t have to like this (I didn’t), but it’s one heck of a business model. Why go through the trouble of creating and selling a product if you can just profit from everyone else’s hard work? I can only think of one improvement to this incredibly profitable model. That would be hiding the fact it even exists. In many ways, I’ve been investigating an investment theme that does precisely that. $16 Trillion by 2028 Here’s an interesting fact… This year, the world is on track to see $11.5 trillion in digital payment transactions. As recently as 2017, this figure was “only” $3.57 trillion. That would be a 15.8% compound annual growth rate (CAGR). And it’s not slowing down. The value of digital transactions is estimated to be $16.6 trillion by 2028. Much of that growth is being driven by e-commerce and mobile PoS systems (think of the credit card readers at your local coffee shop). And this is absolutely a global phenomenon. The McKinsey Global Payments Report – published in September of last year – tells us that the strongest growth is actually being seen in Latin America, which had global payment revenue grow at an annualized rate of 14% between 2017 and 2022. That same report also shared that cash usage declined by nearly 4% in 2022. In all likelihood, that trend is going to continue. Cash just isn’t as important or convenient as it once was. Many businesses no longer accept cash. Some countries like India are banning the use of some large-denominated bills. The trend is clear. Digital payments are here to stay. And this method of payment will only become more prevalent in the years ahead. In investing – not to mention life – there are never “sure things,” but predicting the continued growth of digital transactions is probably the closest we’ll get. All that is very interesting, but what does it mean for investors? When I traveled through Europe, I learned that the government “took a cut” of every transaction through the VAT. Something very similar happens in the realm of digital transactions. One group of companies “take a cut,” and hardly anybody knows about it. Lots of Middlemen Whenever you purchase something with a credit card, perhaps at your local taco stand, it seems pretty simple. Tap, confirm, receipt. As far as most people are concerned, that’s all there is to it. But behind the scenes, it’s much more complicated. Today, your average transaction looks something like this. Look closely, and you’ll see a whole new world you didn’t even know existed. Like a secret VAT, several financial technology companies collects fees as information and money flows between the card issuer, card network, settlement bank, card holder (that’s you and me), and the merchant (that’s the taco stand). Hundreds of millions of transactions go through its systems every day. An area of focus for us are the financial technology (fintech) companies that provide solutions and services to reduce complexity and streamline these transactions. And of course, they receive a cut for that service. A few companies we’re watching in this space are Fiserv, Worldpay, Toast, Stripe, and Shopify. I can virtually guarantee you’ve used the services from these companies whether you know it or not. And while there’s plenty of opportunity in the fintech space, there’s one in particular we have our eye on. A Crown Jewel That’s Dirt Cheap Today, I’ll publish our monthly issue of Intelligent Options Advisor. That’s our service, where we use a variety of options strategies to produce double-digit annualized income. And as you’ll see in today’s issue, we’re focusing on a fintech company that’s at “bargain” valuations. The company processed 66 billion transactions last year. Next year, it’ll do even more. By working quietly in the shadows, this technology infrastructure company maintains operating margins of nearly 50%. So, for every dollar in revenue, about 50 cents goes straight to the bottom line. For context, Wall Street analysts consider Apple’s profit margins legendary at 26%. Again, for paid up subscribers, be on the lookout for that issue later today. And even for readers who haven’t joined us, digital payments are a trend that absolutely needs to be on your radar. And expect to hear more on this topic in the years ahead. Regards, Brad Thomas Editor, Intelligent Income Daily [Wide Moat Research]( Wide Moat Research 55 NE 5th Avenue, Delray Beach, FL 33483 [www.widemoatresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Wide Moat Research welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-415-6046, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@widemoatresearch.com). © 2024 Wide Moat Research. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Wide Moat Research. [Privacy Policy]( | [Terms of Use](