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Is Paysafe a Smart Fintech Stock to Buy?

By Matthew Frankel, CFP® - Apr 14, 2021 at 8:13AM

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This specialized payment processor has some interesting growth opportunities.

Paysafe (PSFE 9.74%) is one of the latest fintech companies to go public via SPAC merger, and it's certainly an interesting business. The payment processor specializes in a few niche markets that have tremendous growth potential in the years to come. In this Fool Live video clip, recorded on April 5, contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss Paysafe's business and why it is different from other payment processors. 

Jason Moser: Paysafe says they are leading specialized payments platform with a two-sided consumer and merchant network, that sounds like Square, whose core purpose is to enable businesses and consumers around the world to connect and transact seamlessly through payment processing.

Matthew Frankel: That last line sounds very familiar. I think that's the exact line Payoneer used when they were on the show not long ago.

Moser: Yeah. That's not to take anything away from them. I'm not saying they don't do that, I'm not saying they don't do it well, but when you have a lot of these companies that are doing the same thing, you have to try to make sense of them and figure out which ones are going to be the better opportunities. But you've had the chance to dig in a little bit to Paysafe. Let's take a big-picture look at this business, understanding that it is a fintech, a payment processing company. What are some of the takeaways from Paysafe? What do you feel like listeners should know about this business?

Frankel: First of all, before I said something a little negative about Payoneer a minute ago, that they used that line.

Moser: But I think you were just comparing the two.

Frankel: The continuation of that is you have to read between the lines to figure out what they do that they're really good at. In Payoneer's case, it was cross-border payments. If you remember from that interview. They do the international payments a lot better than everyone else. But Paysafe, one of the things that they do really well is gaming payments, online gaming, they are the global leader in online gaming payments.

Moser: That's a little bit more clear. I mean, that's a massive market.

Frankel: Right. That's a huge growth market right now because their trend is clearly toward legalized gaming. DraftKings, for example, is one of their customers. William Hill, I don't know if you're familiar with them, that's the sportsbook company that Caesars just bought. They're a Paysafe company. Paysafe did $92 billion of payment volume in 2020.

Moser: Wow.

Frankel: So it's not a tiny operation. They are the No. 2 global leader in digital wallets, by the way. There's a few things that they do really well, which is really key to identify when you're looking at a fintech. Like from when you mentioned Square, I could name three or four things that Square does better than the other fintechs.

Moser: Yeah.

Frankel: In-person payments, no one comes close to Square, in my opinion. Spotify, Fortnite, they are two other bigger customers of Paysafe. What I like about them, unlike a lot of the SPACs, they have very realistic projections. They are a long established company, unlike a lot of these other SPACs. They started in '96. They've been doing online payments for a long time, 25 years now. If you remember a product called Neteller.

Moser: I do remember that.

Frankel: That was a Paysafe product. They've been around for a long time. They were taken public by a SPAC led by Bill Foley, who has a fantastic track record of not only investing but adding value to financial services companies.

Moser: Yeah.

Frankel: FIS, Fidelity Information Services. That was one of his investments. He invested in 2003, where the stocks up something like 35X since then. The margin expansion, he's really helped out with his expertise and got them 1,800 basis points of margin expansion since that time. Just really adds value to all these fintechs. There is a long list on his website of companies that he's really done a great job of adding value to. I like this merger, ticker symbol is PSFE by the way, now it's actually trading under its own ticker symbol since the merger was completed. Thank you, Tim, for putting that in the chat. The merger was completed just a few days ago. It started trading under its new symbol on March 31. Really impressive company. I like that they are a leader in a couple of really key growth markets. I don't know, what do you make of Paysafe?

Moser: It's certainly is a bit more clear understanding that focus on the gaming market, and I agree with you. I mean, it's tremendous opportunity there, particularly as you see sports betting becoming legalized in more and more places. I think that ball is going to continue rolling in that direction. I don't think that's something that is going to change. For a business that, No. 1 has been around for that long, you feel like not only do they have expertise and really the market that they are pursuing, but they've had a lot of experience in building products and services as this payment space has evolved. They're not building something new based on the capabilities the technology affords us today. They've been following this all along the way. To me, I certainly see that as a plus. 

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Stocks Mentioned

Paysafe Limited Stock Quote
Paysafe Limited
$2.14 (9.74%) $0.19
Fidelity National Information Services, Inc. Stock Quote
Fidelity National Information Services, Inc.
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Block, Inc. Stock Quote
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$66.73 (4.43%) $2.83
Spotify Stock Quote
$104.83 (7.50%) $7.31
DraftKings Inc. Stock Quote
DraftKings Inc.
$12.97 (10.20%) $1.20
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