Strategy Note /

Digital payments infrastructure: 10 listed EM companies to watch

  • Digital payments infrastructure is the cornerstone of the new economy; lockdowns have accelerated digital adoption

  • Scalable business models are delivering an attractive mix of double-digit top line growth and double-digit margins

  • EM firms still trade at steep discounts to DM peers, despite financial inclusion driving a better secular growth outlook

Digital payments infrastructure: 10 listed EM companies to watch
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Tellimer Research
6 May 2021
Published byTellimer Research

Payments infrastructure is experiencing strong growth as consumers increasingly adopt the digital lifestyle. Emerging markets firms in this space are seeing similar momentum to their developed market peers, but arguably have better structural growth prospects as financial inclusion improves. We highlight 10 names investors should have on their radars.

Digital payments infrastructure is attracting growing investor interest

We have previously highlighted the importance of payments infrastructure in accelerating e-commerce in emerging markets and the strong growth that some of these payment infrastructures companies are seeing. Investors are also recognising the importance of these companies:

  • Square's share price has increased by 350% over the past year; it is now comfortably worth over US$100bn.

  • In its latest funding round, Stripe was valued at US$95bn, making it one of the world's most valuable unicorns.

We think the prospects for growth in digital payments adoption in emerging markets are superior to those in developed markets, given the potential boost in financial inclusion and younger, more tech-savvy populations. For example, both of Nigeria's tech unicorns are in the payments infrastructure space, Interswitch and Flutterwave.

We highlight below 10 EM-focused listed payment infrastructure companies with scalable business models and high growth potential; these firms have delivered high teens percentage median growth rates in both top line and earnings growth over the past few years.

Listed EM payment infrastructure companies

Strong share price performance reflects Covid-19’s accelerating impact on digital adoption

An equally-weighted portfolio of these names has almost doubled since the beginning of last year, substantially outperforming the broader market, and keeping pace with DM payments infrastructure peers.

EM payments infrastructure share price performance

What is digital payments infrastructure?

We have previously highlighted the rapid development in fintech digital payments throughout emerging markets; Covid-19 is turbocharging their growth. Most of these digital payments systems use their own or dedicated technology and have their own regulatory status. In contrast, infrastructure or payment gateway firms effectively rent their technology out to whoever needs it (and most likely without the knowledge of the end-user).

Digital payments infrastructure companies allow merchants and other institutions to accept payments from their customers in a variety of methods including cards, mobile/digital wallets and bank accounts. This includes both traditional infrastructure services like POS devices and modern payment methods through online/digital channels.

Here, we focus on the online part of the payments infrastructure story: it is growing rapidly due to e-commerce but is also much more scalable. We have observed that many companies offer both traditional and digital payments services; our company profiles highlight the vastly different growth trajectories of both these payment infrastructure models.

To better illustrate the payments value chain, we present the process flow below. Firms like Ant Group’s Alipay are well known to their consumers, but there is a lot of infrastructure in the background these individuals will be less familiar with.

Digital payments process flow

Source: Yeahka prospectus, Tellimer Research

Top line KPIs

In the table below, we provide key revenue performance indicators for four of the EM digital payment infrastructure plays, based on data availability.

Pagseguro has a strong take rate due to its focus on small and micro merchants, as well as consumers, while Stoneco, which focuses on bigger merchants, has higher revenue and transactions per merchant. Chinese payments firm Yeahka tend to have very high transaction value but low take rates; the market is already highly developed, with efficient infrastructure capable of handling large volumes; for example, Ant Group’s Alipay platform handles a higher value of transactions than Visa and Mastercard’s global operations combined.

Revenue KPIs for selected EM payment infrastructure companies

Operating KPIs

We present below the key operating performance indicators of the selected names. Brazil’s Stoneco and Pagseguro have the highest gross margins; Stoneco earns higher revenue per client while Pagseguro has a higher take rate. GHL spends most on selling and admin expenses, which could reflect its geographical diversity; it must spend more on customer acquisition in locations where it is not the natural market leader. Interestingly, despite its low take rate, Yeahka was able to record a high net margin, largely reflecting the strong efficiency of its operations. Companies in South Korea have mixed profiles: KG Mobilians and Kiginicis Co both have a high margin and spend aggressively on admin and distribution, while NHN KCP and KIC have relatively lower margins and spend less on distribution.

EM payment infrastructure companies operating KPIs


Below, we show valuation metrics for our ten highlighted EM digital payments infrastructure stocks. Stoneco trades at the highest valuation multiples, justified by its strong revenue and profit growth, and above-average margins. Kginicis trade at lower multiples, which likely reflects its slow revenue growth in the past few years, as well as its low net margin.

EM digital payments infrastructure: stock valuation metrics

Developed market peers have also enjoyed strong share price performance

To help place our ten highlighted EM payments infrastructure companies into context, we replicate some of the above tables for developed market proxies. These DM names have generated median top line growth of 21% and earnings growth of 15% over the past few years, broadly in line with the EM universe we have presented above.

Listed DM payment infrastructure companies

As these tables show, while developed market payments infrastructure companies are also experiencing strong growth, their valuations are much more elevated than their EM peers.

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Despite these high valuations, the share prices of the developed market infrastructure companies have proven more resilient in recent months:

DM payments infrastructure share price performance

Note: In a follow-up report, we will look in more detail at the business models and operating performance of the 10 highlighted EM digital payments infrastructure names referenced above.

Acknowledgements: We would like to thank Rabail Adwani for his assistance with this report

See Tellimer’s fintech library for the full list of our fintech coverage over the past year.