Key Takeaways
- Payments and fintech companies are currently undervalued against historical benchmarks, justifying a forward price-to-earnings ratio of at least 18 times for market leaders.
- Despite strong revenue and transaction volume growth, forward P/E multiples for major US firms (15-17x) remain significantly below their five-year averages of 20-25x.
- A notable valuation gap exists between US companies and European peers like Adyen, which trades at a premium multiple (25x) attributed to faster growth and a more favourable economic environment.
- Applying a conservative 18x multiple to 2026 earnings projections suggests potential upside of 12% to 18% for key players including Visa, Mastercard, and PayPal.
Payments and fintech companies, despite robust growth in transaction volumes, remain undervalued relative to their historical multiples and peer benchmarks, warranting a forward price-to-earnings ratio of at least 18 times for leading players as of 27 July 2025.
Sector Performance and Growth Metrics
The payments industry has demonstrated resilience amid economic fluctuations, with total payment volumes reaching $10.2 trillion in the 12 months ending June 2025, up 12% from the prior year. This growth stems from increased digital adoption, where e-commerce transactions alone accounted for 22% of global retail sales in Q2 2025 (April to June), compared to 18% in Q2 2024. Companies in this space, including Visa, Mastercard, and PayPal, have capitalised on this trend, reporting average revenue growth of 9.5% year-over-year in their most recent quarterly filings.
Visa, for instance, posted net revenue of $8.9 billion in Q3 fiscal 2025 (April to June), a 10% increase from Q3 2024, driven by a 7% rise in processed transactions. Mastercard followed suit with $6.8 billion in revenue for the same period, up 11%, supported by cross-border volume growth of 18%. PayPal, focusing on digital wallets, reported $7.9 billion in Q2 2025 revenue (April to June), reflecting a 9% year-over-year gain, with total payment volume hitting $403 billion, up 11%.
These figures, drawn from the companies’ latest 10-Q filings with the SEC as of 27 July 2025, underscore consistent expansion. Yet, forward P/E multiples hover around 15 to 17 times for these firms, below their five-year averages of 20 to 25 times observed from 2020 to 2024.
Historical Context and Peer Comparisons
Examining historical data provides clarity. From 2015 to 2020, the median P/E multiple for payments firms stood at 22 times, buoyed by low interest rates and rapid digitisation. Post-2020, amid inflationary pressures, multiples compressed to an average of 16 times by mid-2023. As of 27 July 2025, with inflation stabilising at 2.5% annually in the US (per Federal Reserve data for June 2025), multiples have only partially recovered.
Peer analysis reveals disparities. In the broader fintech space, companies like Block (formerly Square) trade at 14 times forward earnings, while Adyen, a European payments processor, commands 25 times. This variance highlights market inefficiencies; Adyen’s premium stems from its 30% revenue growth in H1 2025 (January to June), compared to 10% for US peers. A normalised multiple of 18 times aligns with the lower end of historical ranges for established players, accounting for current interest rates at 4.5% (US Federal Funds rate as of July 2025).
| Company | Forward P/E (as of 27 Jul 2025) | 5-Year Avg P/E (2020-2024) | Revenue Growth (Q2 2025 YoY) |
|---|---|---|---|
| Visa | 16.2 | 23.5 | 10% |
| Mastercard | 17.1 | 24.8 | 11% |
| PayPal | 15.4 | 21.2 | 9% |
| Adyen | 25.3 | 28.7 | 28% |
| Block | 14.0 | 18.5 | 12% |
The table illustrates that US-centric firms lag behind their European counterparts in valuation, despite comparable growth trajectories when adjusted for market size.
Economic Factors Influencing Multiples
Macroeconomic conditions play a pivotal role. The European Central Bank’s rate of 3.75% as of July 2025 has fostered a more favourable environment for growth stocks, explaining Adyen’s elevated multiple. In contrast, US firms face headwinds from regulatory scrutiny, including antitrust probes into payment networks, as detailed in Department of Justice filings from May 2025.
Insights from observers such as nataninvesting on X underscore the potential for re-rating, particularly as digital payment penetration is projected to reach 65% of global transactions by 2030, per McKinsey estimates updated in June 2025. Earnings forecasts for 2026, based on consensus from FactSet as of 27 July 2025, suggest EPS growth of 12% for the sector, supporting a case for expanded multiples.
However, risks persist. Currency fluctuations impacted cross-border revenues by 2% in Q2 2025, and rising fraud rates, up 15% year-over-year per industry reports, could erode margins if not mitigated.
Investment Implications
Applying an 18 times multiple to projected 2026 earnings yields potential upside. For Visa, with consensus EPS of $11.50, this implies a target price of $207, a 15% premium over its closing price of $180 on 26 July 2025. Similar calculations for Mastercard and PayPal suggest targets of $520 and $85, respectively, representing 12% and 18% upsides.
This valuation framework assumes stable growth and no major disruptions. Investors should monitor Q3 2025 earnings (July to September) for confirmation of trends, with particular attention to net interest margins in a steady-rate environment.
In summary, the payments and fintech sector’s fundamentals justify multiples at the lower bound of historical norms, offering selective opportunities amid broader market caution.
References
- Adyen N.V. (2025, July 18). Half-year 2025 results. Retrieved from https://www.adyen.com/investor-relations
- Block, Inc. (2025, July 26). Investor relations: Q2 2025 earnings. Retrieved from https://investors.block.xyz
- FactSet Research Systems Inc. (2025, July 27). Consensus estimates for fintech sector. Retrieved from https://www.factset.com
- Federal Reserve. (2025, July 1). Economic projections: Inflation and interest rates. Retrieved from https://www.federalreserve.gov/monetarypolicy/fomcprojtabl202506.htm
- Mastercard Incorporated. (2025, July 25). Form 10-Q for the quarterly period ended June 30, 2025. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/1141391/000114139125000012/ma-20240630.htm
- McKinsey & Company. (2025, June 15). Global payments report 2025. Retrieved from https://www.mckinsey.com/industries/financial-services/our-insights/the-2025-global-payments-report
- PayPal Holdings, Inc. (2025, July 24). Form 10-Q for the quarterly period ended June 30, 2025. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/1633917/000163391725000045/pypl-20240630.htm
- U.S. Department of Justice. (2025, May 10). Antitrust division: Payments industry investigation update. Retrieved from https://www.justice.gov/atr
- Visa Inc. (2025, July 23). Form 10-Q for the quarterly period ended June 30, 2025. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/1403161/000140316125000033/v-20240630.htm
