Payment Networks & Processors (V, MA, PYPL, FISV, FIS, GPN, AXP, XYZ, ADYEY, etc.)

[Spekulatius]

On 4/1/2026 at 10:11 AM, frommi said:

Is the drawdown in these companies really just because of the stablecoin chatter? Or is it that fear of Apple and Google pay taking over all payment processing on all sides? (however that should work)

I do t think it’s just stablecoin chatter. The growth rates have come down and there seems to be some margin pressure as well. Lot’s of competition. The sector went from darling to very much out of favor.

[frommi]

Given the fact that nearly every payment processor in SMB sector is just growing by aquisitions, shouldnt that also imply that it is very sticky?
Ayden doesnt seem to target SMB's (or only via Shopify) and Block is more expensive for the merchant?
Margins for GPN and FISV still look very stable, even if FISV had the problems with the additional fees from previous Management that they rolled back. 
Maybe what we are seeing is just the consumer getting under pressure and that reverses someday?

[tnathan]

Klarna is the best value in payments currently. It will be a multi-bagger.

[Spekulatius]

19 minutes ago, tnathan said:

Klarna is the best value in payments currently. It will be a multi-bagger.

I thought they are basically a BNPL provider (unsecured lender) not so much a payment processor.

 

What makes you think it’s a multibagger?

[tnathan]

40 minutes ago, Spekulatius said:

I thought they are basically a BNPL provider (unsecured lender) not so much a payment processor.

 

What makes you think it’s a multibagger?

Yeah they are but I lump BNPL into alternative payments networks. In order for this to be a multibagger you need to believe a few things: (1) BNPL will continue to take share from credit cards (2) The BNPL model is not as risky as the market seems to think (3) Klarna has some weird accounting treatment for its longer term fair financing loans which distort near term numbers which feeds into #2 but is incorrect. 

 

BNPL will definitely keep gaining share - I think 15% revenue CAGR through 2030 is super reasonable. BNPL charge off rates are low, driven by incredibly strong visibility from short duration. Unlike other lenders, the bear case means lower revenue growth but credit remains ok - other lenders lose their shirt because duration is too long. Fair financing is a good, higher-margin product which distorts losses in the financial statements (they need to reserve when a loan is taken out). 

 

If you think qualitatively the market is getting the biz wrong this is the simple math: 15% revenue CAGR, take rate flat at 2.8% (should increase as fair financing becomes larger share), operating margin scales to 20% (could be much higher over time), exit multiple of 15x operating income gets you to ~35% CAGR through 2030. 

[kab60]

I don't see how Klarna will ever become a good business. It seems more like a feature that's easy to replicate (and others have). Just another button amongst an awful lot of buttons in the checkout-phase. And then you also have to deal with credit risk.

 

 

[tnathan]

Definitely not just a button. Lot of work has to go into (1) integrating directly with the merchant (2) having custom merchant specific pricing (3) building good enough underwriting models to operate profitably (4) building a strong consumer end to have a 2 sided marketplace on which you can layer additional products (klarna card).

 

People assume BNPL is risky but loss rates are very low driven by the fact that every transaction is reudnerwritten (unlike Line of credit on credit card) and the duration is very low so udnerwriting policies can be shifted quickly

[valueseek]

how do you value something like Klarna. Do you use any BS metrics or just normal PE, etc. and Is there FCF calc. different than normal. Remember the rage Afterpay from Aus was that Block acquired - so have stayed away from this. Also, UPST is very different from this? 

[EBITDAg]

The interesting thing about companies like Klarna is that they can basically turn over their cash ~17x a year since the average time they extend money is 3 weeks. It's been 5+ years since I've thought much about it, but the unit economics are theoretically quite good when you can re-lend the same money 17x a year.

Edited April 15 by EBITDAg

[Spekulatius]

I am with @kab60 here that it seems more like a feature than a produce much less something you can build a business on. I think some CC companies offer this too nowadays and why not - they have already all the customers data to validate the credit.
Perhaps there is a niche there to offer BMPL for those that can’t get credit card abut I guess for this clientele, the credit losses won’t be small either.

Edited April 15 by Spekulatius

[frommi]

Yes, Klarna looks a lot like what Paypal is doing. No interest in that side of things, especially since FISV is such an obvious bargain. Their bonds trade at +1.3% over treasuries, if there would be real trouble, these bonds would show it:
 

Bond Comparison: Payment Sector vs. 10Y US Treasury

 

Issuer / Benchmark	Maturity	Coupon	Current Yield	Rating (S&P/Moody's)	ISIN / Ticker
Shift4 Payments (FOUR)	15.08.2032	6.75%	~7.04%	BB- / Ba3	US82452JAB44
Global Payments (GPN)	15.08.2035	~5.85%	~6.10%	BBB / Baa3	US37940XAA32
Fiserv (FISV)	11.08.2035	5.25%	~5.60%	A- / Baa2	US337738BQ04
10Y US Treasury (Benchmark)	10 Years	–	4.32%	AAA / Aaa	–

[kab60]

12 hours ago, tnathan said:

Definitely not just a button. Lot of work has to go into (1) integrating directly with the merchant (2) having custom merchant specific pricing (3) building good enough underwriting models to operate profitably (4) building a strong consumer end to have a 2 sided marketplace on which you can layer additional products (klarna card).

 

People assume BNPL is risky but loss rates are very low driven by the fact that every transaction is reudnerwritten (unlike Line of credit on credit card) and the duration is very low so udnerwriting policies can be shifted quickly

That sounds like a button (with credit risk) to me.

 

Except for 4), building a strong consumer end and a 2-sided market place. But 4) seems like a solution looking for a problem, not something consumers want or need, nor something that is ever likely to gain traction. 

 

PayPal might have had the opportunity to make a superapp/mkt place-like business a decade ago - even foregoing Visa/MA. That never happened. Don't see how Klarna would ever succeed. And PayPal, which hasn't exactly shown high product velocity, seems to have spun up a BNPL lender in little time.

 

Who wants to start their shopping experience/consumer experience in their lenders' app?

 

 

[kab60]

3 hours ago, frommi said:

Yes, Klarna looks a lot like what Paypal is doing. No interest in that side of things, especially since FISV is such an obvious bargain. Their bonds trade at +1.3% over treasuries, if there would be real trouble, these bonds would show it:
 

Bond Comparison: Payment Sector vs. 10Y US Treasury

 

Issuer / Benchmark	Maturity	Coupon	Current Yield	Rating (S&P/Moody's)	ISIN / Ticker
Shift4 Payments (FOUR)	15.08.2032	6.75%	~7.04%	BB- / Ba3	US82452JAB44
Global Payments (GPN)	15.08.2035	~5.85%	~6.10%	BBB / Baa3	US37940XAA32
Fiserv (FISV)	11.08.2035	5.25%	~5.60%	A- / Baa2	US337738BQ04
10Y US Treasury (Benchmark)	10 Years	–	4.32%	AAA / Aaa	–

GPN+FIS looks like a better version of FISV to me. FISV seems to have real issues in their core banking business, which aren't quickly fixed (and probably ends up getting sold).

[frommi]

3 hours ago, kab60 said:

GPN+FIS looks like a better version of FISV to me. FISV seems to have real issues in their core banking business, which aren't quickly fixed (and probably ends up getting sold).

I can understand your view, but FIS and GPN are both bad capital allocators in my view. Both paid 10x and 12x EBITDA for a business while their own stock trades at 6 or 7x EBITDA. I understand the transaction that took place and agree that both parts are now at the right place, but the real beneficiary was GTCR.
FISV on the other hand just has this "unknown" overhang of the past management, but it now has a very good management in place that has kitchen sunk every number in their toolbox to look good coming quarters. I doubt there are material differences between the businesses, but the management at FISV now is much better.

[MMM20]

I own some GPN+FOUR, but nowadays I’m wondering: would buying this entire group actually be the best move? Should we channel Buffett in South Korea or Japan?

 

Edited April 16 by MMM20

[frommi]

For me FOUR is much more at risk in a recession (because of the end market of stadiums and hotels) and their cost of debt is a lot higher than the rest, so it was easy for me to pass on that one. I can see me owning FISV,FIS,GPN,AYDEN,V,MA at some point, but the last three dont pass my cheapness test at the moment. I am a bit hesitant to buy V/MA at current prices when theres also the stablecoin disruption risk hanging over their head. I own FISV and GPN at the moment.

[frommi]

And i didn't buy FIS because they stopped their buyback program to delever, i learned in tobacco that the market doesn't really like such a move, that was the reason BTI was such a laggard in the beginning of the tobacco bull market. But might be different here.

[KPO]

1 hour ago, MMM20 said:

I own some GPN+FOUR, but nowadays I’m wondering: would buying this entire group actually be the best move? Should we channel Buffett in South Korea or Japan?

 

Back in the late ‘90’s/early 2000’s at the AGM Buffett and Munger talked about the opportunity missed by not taking this approach with pharmaceuticals. I feel like I have a decent grasp of the economics from owning STNE the last several years, which has performed pretty well, albeit in a different geographic market that has a fair amount of currency risk attached. But I still have somewhat limited visibility to what makes one of these companies more likely to generate more FCF per share over time than the other. That being the case I bought a basket of PYPL, FIS, FISV, GPN & FOUR, and sized positions based on perceived risk (e.g. FOUR is the smallest position).
 

Did the same thing in healthcare over the last several months and enterprise cloud-based software recently. It should be interesting to see how it all pans out.

[kab60]

6 hours ago, frommi said:

I can understand your view, but FIS and GPN are both bad capital allocators in my view. Both paid 10x and 12x EBITDA for a business while their own stock trades at 6 or 7x EBITDA. I understand the transaction that took place and agree that both parts are now at the right place, but the real beneficiary was GTCR.
FISV on the other hand just has this "unknown" overhang of the past management, but it now has a very good management in place that has kitchen sunk every number in their toolbox to look good coming quarters. I doubt there are material differences between the businesses, but the management at FISV now is much better.

I think prior management did poorly at FIS, whereas current has done the right things and seems to have improved underlying business (focused the business on core bank software, exited merchant acquiring + improved organic growth & margins). If you trust them, recurring one-offs should drop off going forward, so that GAAP FCF ramps to +3B in a couple of years. Will de-lever in 12-18 months, thereafter they've committed to become a 'boring' grower with massive buybacks. It's not Jack Henry, but it's not like their core banking clients hate them like they hate Fiserv (https://www.aba.com/-/media/documents/reference-and-guides/2024-core-platform-survey.pdf?rev=f282f2c8fa1048dc8ab157ff8d9855ac

 

Edited April 16 by kab60

[kab60]

5 hours ago, frommi said:

For me FOUR is much more at risk in a recession (because of the end market of stadiums and hotels) and their cost of debt is a lot higher than the rest, so it was easy for me to pass on that one. I can see me owning FISV,FIS,GPN,AYDEN,V,MA at some point, but the last three dont pass my cheapness test at the moment. I am a bit hesitant to buy V/MA at current prices when theres also the stablecoin disruption risk hanging over their head. I own FISV and GPN at the moment.

Interesting... I think the biggest risk with these names is poor management/awful capital allocation and think FOUR is the least risky. Their M&A strategy might appear risky given all the blowups in the sector, but I think they've smartly decided to play in verticals with lots of complexity + little competition (perhaps save for restaurants, but even then it's mostly them against TOAST). And have a strong track record to back it up, even thought a lot of people don't seem to get the Global Blue acquisitions (which really shouldn't start paying dividends before H2 '26 and onwards). More importantly, it's basically founder-led, given the CEO is an extension of the founder, Jared Isaacman, who has been buying shares and owns 25%. I'm also not really worried about their exposure in a recession, they expect to grow ~15% organically in NA in '26 (and given no meaningful deals LTM, organic should be pretty organic in this case...), so I think they have a long runway of organic growth even in a downturn.

 

At the same time, FISV, FIS & GPN are all in the penalty box and I doubt they'll be able to do anything stupid for a long time (FIS has committed to become a 'boring' compounder with large buybacks + only small tuck-ins. Elliot is on the board of GPN, so they won't buy another Worldpay (more likely a PE exit unless the multiple re-rates). FISV is in shambles and looks more like a seller than a buyer + current CEO seems to 'get it', so I also think the risk in that case is pretty low).

 

Anyway, that's what makes a market. I think they're all pretty cheap and their deaths highly exaggerated. Perhaps save for Paypal, which just seems to be in a worse spot competitively, but at least they have no debt and the share price might discount a faster decline than what's likely.

[frommi]

Yeah i think you can do fine in all of the names mentioned, and the basket approach is probably a good idea. Its also a bit personal, i would prefer FISV solely for the reason that i see its logo everytime i go to my supermarket. 

Edited April 16 by frommi

[tnathan]

On 4/15/2026 at 4:00 PM, EBITDAg said:

The interesting thing about companies like Klarna is that they can basically turn over their cash ~17x a year since the average time they extend money is 3 weeks. It's been 5+ years since I've thought much about it, but the unit economics are theoretically quite good when you can re-lend the same money 17x a year.

I think you're getting it

[tnathan]

On 4/15/2026 at 2:53 PM, valueseek said:

how do you value something like Klarna. Do you use any BS metrics or just normal PE, etc. and Is there FCF calc. different than normal. Remember the rage Afterpay from Aus was that Block acquired - so have stayed away from this. Also, UPST is very different from this? 

High level I value it by projecting growth driven by increased uptake of BNPL, what I think take rates on GMV will be (they should actually increase a bit over time as they extend into longer term loans), and normalized loss rates (should be structurally lower than CC given shorter terms and ability to re-underwrite every txn). Their cost of funds is quite low and they recycle the balance sheet a huge amount. My broader point is that the business doesn't have to be dominant for the stock to be a big winner from these prices. Affirm has the chance of building something quite special - I don't think Klarna is at that level.

[tnathan]

On 4/15/2026 at 5:14 PM, Spekulatius said:

I am with @kab60 here that it seems more like a feature than a produce much less something you can build a business on. I think some CC companies offer this too nowadays and why not - they have already all the customers data to validate the credit.
Perhaps there is a niche there to offer BMPL for those that can’t get credit card abut I guess for this clientele, the credit losses won’t be small either.

But credit card providers have to offer BNPL (1) after purchase and (2) generally a one size fits all situation. They are NOT integrated at checkout which matters a huge amount. It takes a lot of work to be integrated with custom, merchant-specific offerings. I doubt I'll change people's minds but just look at the numbers -- the growth at Klarna and Affirm has been incredibly strong and consistent. Better to try and understand why vs. writing this off as something that will easily be competed away (but for some reason hasn't been yet at all).

[Spekulatius]

@tnathan fair enough. I am fixing going through the newly published 20-F which is actually pretty good primer to understand the business.

 

A few things I noticed:

1) transaction margin is ~2.7% and has been rising slowly

2) They are a becoming more of a lender (Fair Lending) which increases duration and credit risk. THe upfront provisions for fair lending loans have been impacting their last results (they get substrates from transaction $)

3) They pay quite a bit for deposits (~5.1%)

4) It’s all about the US market now. Success in the US market will determine if this stock works.

 

 

 https://www.sec.gov/ix?doc=/Archives/edgar/data/0002003292/000200329226000007/klar-20251231.htm

 

Got more work to do but just wanted to park my preliminary through there.

Edited April 22 by Spekulatius