Are new payment technology startups really displacing incumbents? In the longer-term perhaps, but one wouldn't be able to tell from the share price movements with just about all new payment tech companies suffering big losses while Visa and Mastercard enjoying 9% plus gains in overnight trade on strong transaction growth. Local bank shares are also outperforming while Mint Wireless (MNW), eServGlobal (ESV) and 99 Wuxian (NNW) are down over past three months. Even over the longer term, these shares have not outperformed payment giants Mastercard and Visa, which are up around 200% (see chart). This does cloud the risk-adjusted attractiveness of emerging technology sector.
The difference is scale. New technology is something the incumbents can buy if it really starts to agitate them, sure they might have to pay a bit for it but they can afford to if they have to. The difference is the existing client base that these global companies (like AMEX, Visa, Mastercard etc) have and their brand recognition is so valuable, embedded and so hard to replicate.