U.S. Payments & Processors: Mixture of Opportunities and RisksÌý

Payments & Processors face both opportunities and risks when contemplating ESG considerations, including digitization, cybersecurity, the rise of alternative payment rails, Buy Now Pay Later (BNPL) and more. Hence, the sector represents a mix across the ÃÛ¶¹ÊÓƵ Proprietary ESG Risk Groupings, with multiple companies in Group Two (G2) and Three (G3). Companies in G2 tended to better capture opportunities arising from digitization trends, while being innovative and taking action to address ESG related considerations, including expanded product offerings to serve the unbanked and underbanked. Those at higher risk of seeing their business models being disrupted by newer technology and/or other ESG considerations tended to be in G3. That said, several G3 companies are improving positioning and could migrate to G2 over time.

Sector Catalysts: Digitization vs Rise of Alt Payment Rails

The industry has benefitted from the rapid rise in global digital payments and e-commerce adoption (accelerated due to COVID-19), with payments players responding to service the surge in demand for frictionless, digital solutions, including contactless POS payment options, digital wallets, API offerings, and real-time payments. Meanwhile, the rise in cybersecurity threats and alternative payment methods presents risk. Opportunities may arise for those that respond innovatively; this is an area we will monitor closely.

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