Novi shakes remittance stocks, but which payments companies are most volatile?

Novi shakes remittance stocks, but which payments companies are most volatile?

Facebook has launched its Novi digital wallet, which will initially use the Paxos Dollar stablecoin rather than the company’s own cryptocurrency. We’ll be diving into the offering in more detail next week, but it did cause strong moves in the market – particularly for companies with exposure to digital remittances.

Remittance stocks react to Facebook's Novi launch

Facebook’s Novi sparks drop in remittance stocks

Despite announcing a partnership with Novi on the same day, Remitly was worst hit as the most digitally focused remittance player on the public markets. Meanwhile, the level of impact on MoneyGram, Western Union and Intermex reflects the relative importance of digital to each company’s remittance offering – Intermex as a primarily cash-based player was mostly unscathed. 

Novi is launching initially with no fees and no FX charge on the US – Guatemala corridor. This may have further spooked the market who may have assumed that the fully rolled out product will also be free. 

Wise also saw a one-day drop of 7.1%, although as this coincided with its quarterly results publication, it’s unlikely to be entirely due to the launch. Wise’s customer focus makes it much less of a direct competitor to Novi and US – Guatemala isn’t even a corridor offered by Wise. 

Which payment stocks are most volatile?

These material investor responses are also particularly interesting to consider in the context of the wider volatility of the cross-border payments market. 

The most and least volatile payment stocks

Looking at the one-year beta values gives us a sense of how volatile different companies are compared to the overall market – and those seeing the highest volatility are largely payments processors and ecommerce companies – very much hot areas for investors. Aside from the reaction to Novi above, remittance companies have been the most stable and with Remitly only recently listed, its volatility metrics are not yet meaningful.

We also looked at market volatility two years ago, and there are significant changes for some. MoneyGram in particular has become far less volatile – in November 2019 it had a beta value of 2.78 (literally off this chart). But since then, MoneyGram has become far more stable, exiting its Deferred Prosecution Agreement, restructuring its capital base and building its digital offering. 

Alpha and Euronet have also reduced their volatility, however Visa, Mastercard and PayPal have seen theirs climb, crossing the threshold into higher volatility than the market. 

The numbers suggest how differently investors are viewing the payments industry over just few years – particularly given the immense upheaval of the pandemic. 

How payment companies performed in Q3

With this in mind, it’s worth looking at the stock market performance of key payment companies during Q3 2021.

On Q3 stock market performance, new entry Wise has outstripped most others with a surging valuation following its direct listing on the LSE, although it’s now down over 20% since it’s October highs.

Flywire and dLocal, who also recently listed, have both maintained their new-entry rises. On the payment processing side, the newer players on balance have grown their values whilst the big incumbents such as FIS, Fiserv and Global Payments have fallen. This suggests investors are picking specific winners as opposed to just backing the sector.

How are payment companies competing on pricing?

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