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The fintech industry experienced a notable uplift on Wednesday in light of the Trump administration’s recent announcement concerning a 90-day suspension of anticipated tariffs.
Companies such as Affirm witnessed a significant increase of 20%, while Toast and Block saw a rise of 13%, and PayPal experienced a 10% uptick. However, it is important to note that this temporary reprieve does not eradicate the potential threat of tariffs; rather, it simply postpones the issue. Investors remain cautious, weighing risks associated with inflation, potential cutbacks in consumer spending, the rising costs of hardware imports, and credit vulnerabilities.
Established payment networks like Visa and Mastercard, both moving up 6%, are positioned to benefit from inflationary trends due to their fundamental connection to nominal GDP. These companies earn a percentage from every transaction processed, which positions them favorably during periods of price inflation.
“When prices increase for certain goods, using a credit card can actually be beneficial for credit card companies,” remarked Dan Dolev, a fintech analyst at Mizuho. Their historical pricing models have proven resilient even during periods of inflation and economic downturns, contrasting with the challenges faced by newer consumer lending fintech companies.
For instance, Affirm, which focuses on providing ‘buy now, pay later’ services, may encounter difficulties if consumers reduce spending following the tariff pause, especially if it leads to higher prices. A recent estimate from Goldman Sachs indicates that Affirm could experience a decline of more than 22% in revenue margins, which represent the company’s earnings after accounting for transaction costs and customer incentives.
The uptake of buy now, pay later options may increase as consumers approach their credit limits, according to SIG analyst James Friedman. However, he cautioned that this model has not yet been robustly tested in an economic downturn.
Companies like Toast, Block, and Fiserv, which deliver software solutions for restaurants and small businesses, could face pressures stemming from increased hardware costs and a slowdown in customer demand should tariffs be enacted.
On the other hand, cross-border payments—a particularly lucrative area for Visa, Mastercard, and PayPal—are experiencing challenges as global travel declines and e-commerce adapts to the uncertainty surrounding tariffs. Additionally, remittance services such as Remitly and Western Union, both increasing by 8%, may confront longer-term challenges if immigration channels become restricted or if regulatory scrutiny tightens around remittance flows. Like cross-border commerce, remittances heavily rely on a consistent flow of individuals and transactions, both of which are currently precarious.
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