Is Visa Stock a Smart Way to Invest in the Cashless Economy?
Key Points
Visa's scale is clearly shown by its $4.4 trillion in Q2 payment volume and 5.1 billion cards in use.
With its powerful network effect and incredible profitability, this business provides perhaps the safest way to invest in the cashless economy.
Because the stock trades at a fair valuation multiple, investors can expect returns to resemble earnings per share growth.
It seems the entire market is enamored of anything related to artificial intelligence. While AI has been the key story affecting equities in recent years, investors shouldn't lose sight of other durable secular trends that continue to show promise.
The ongoing rise of the cashless economy is one such area, enhanced by the convenience and security of transacting without physical money and paper-based methods. There are many companies tapped into this opportunity, ranging from traditional banks to fintech upstarts.
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But card payment juggernaut Visa (NYSE: V) stands out, mainly because it dominates how commerce is done. Is this financial stock a smart way to invest in the cashless economy?
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Visa is a critical part of the economic system
During the first three months of 2026, which is Visa's fiscal 2026 second quarter, the business handled a whopping $4.4 trillion in total payment volume. That's an absurd dollar figure that highlights how massive the company's payment platform is. There are also 5.1 billion Visa cards in use around the world.
There might be no purer way to bet on the cashless economy. In fact, it's easy to argue that Visa promotes the obsolescence of cash and paper-based transaction methods. It has adoption in more than 200 countries and territories, with 175 million merchant acceptance locations.
Investors might believe that the rise of newer payment innovations, such as those coming from fintech companies and stablecoins, represents a better way to invest in this secular trend. But I think a valid argument can be made that they actually spur cashless transactions by simply providing different on-ramps. And consequently, they benefit Visa, which possesses a powerful network effect that is almost impossible to disrupt.
For what it's worth, Visa is working on different stablecoin initiatives. But it's hard to believe that this cryptocurrency innovation is a major threat, as most consumers laren't likely to stop using their credit cards that come with the perks and rewards they love.
Investment returns depend on valuation and earnings growth
Between fiscal 2022 and fiscal 2025, Visa's adjusted earnings per share grew at a compound annual rate of 15.2%. Over the coming three years, analysts hold the consensus view that this profit metric will rise at a yearly clip of 13.5%. This tailwind helps the stock price.
Another variable to look at is valuation. Visa shares' current price-to-earnings ratio of 28.5 marks a 24% decline over the past 12 months, but I believe it's at a reasonable multiple for what is a very high-quality company. Visa's net profit margin last fiscal quarter was an astounding 53.6%.
Thus, in the years ahead, investors can expect the stock to generate an annualized return of 13% to 14%, which mimics bottom-line performance. For what can be considered a safe way to bet on the cashless economy, that's a solid potential return.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.