As is the case with numerous other industries, aspects of the financial industry are experiencing transformative technology-driven change, ranging from electronic trading platforms to software-as-a-service suppliers of financial intelligence to the investment community. While many of our financial technology holdings are based in the U.S., we also own U.K.-based Worldpay Group plc. (LSE:WPG, Financial), the largest payment processor and merchant acquirer in Europe.
As shown in the chart above, payment methods are increasingly shifting from cash to cards worldwide. We believe this trend will continue and Worldpay will be a significant beneficiary. The company enables 400,000 merchants in 146 countries to accept electronic payments in 126 currencies by connecting them to payment networks. Worldpay is dominant in the U.K. market and has a fast growing and highly profitable e-commerce business that is benefiting from the rapid growth of online commerce. We think margins are poised for expansion driven by operating leverage, strong growth of the high-margin e-commerce segment, and a migration onto a new processing platform. Earnings should also benefit from debt repayment and a declining tax rate.
From Baron Insights: Banking on Growth in International Financials.
