Buy now, pay later is the mantra of modern life.

The global economy rests on a foundation of plastic. In the U.S. alone, there are 636 million credit cards held by consumers. The average credit card debt is $5,331 and 83% of adults have at least one credit card. The current outstanding revolving debt in the U.S. is $1.04 trillion.

Credit cards are a highly profitable business for the companies that issue them. That’s why banks continue to inundate consumers with credit card offers. It’s also why the companies behind these cards typically hand market-beating returns to investors.

Most purchases today are made using some form of plastic. The resilience of consumer confidence, even in the face of trade war and rising interest rates, is good news for credit card companies.

The dominant company in the credit card space is Visa (NYSE: V). Is the company a good investment now, or do economic storm clouds make it a risky bet? Visa also faces competition from technology “disruptors” that threaten to dethrone the company.

Below, I weigh the pros and cons of Visa and examine the prospects of its stock in 2019.

What Is Visa?

With a market cap of $315.1 billion, Visa is the largest credit card payment organization in the U.S., based on annual value of card payments transacted and number of issued cards. It’s the second largest in the world, behind China UnionPay.

Visa provides its services under the Visa, Visa Electron, Interlink, V PAY, and PLUS brands.

Based in San Francisco, California, Visa also operates VisaNet, a processing network that facilitates authorization, clearing, and settlement of payment transactions, as well as fraud protection.

How Has Visa Stock Performed?

What Is Visa Stock History?

Visa has outperformed over the long haul. Over the past five years, Visa stock has gained 156.8% whereas the S&P 500 has gained 49.9%.

How Has Visa Performed In 2017/2018?

• In 2017, Visa shares gained 43.4% whereas the S&P 500 gained 19.4%.
• In 2018, Visa shares gained 14% whereas the S&P 500 lost 7.5%.

Who Are Visa’s Rivals?

Visa and its top rivals are brand name, blue-chip credit card companies. But they’re all stepping up to the plate to compete with PayPal (NSDQ: PYPL), Square (NYSE: SQ), and other peer-to-peer payment solutions.

Read This Story: Our Square Stock Prediction in 2019 (Buy or Sell?)

Notably, Visa and the three companies outlined below have teamed up with Apple’s (NSDQ: AAPL) Apple Pay, the mobile payments service and digital wallet app.

This video quickly explains how Apple Pay works:

Visa and its major competitors enjoy vast global scale and deep pockets. Over the decades, they’ve forged networks with large financial institutions and retailers. It takes more than just issuing credit or debit cards to get into this business; regulatory and security hurdles must be overcome as well.

Large customer bases provide further competitive advantages for the Big Four, to help them ward off the upstarts that provide cashless payment solutions. Let’s take a closer look.

Mastercard (NYSE: MA)

Mastercard (market cap: $226.4 billion) is the number two payment system in the U.S., behind Visa.

Mastercard markets the MasterCard, Maestro, and Cirrus brands, provides a transaction authorization network, and collects fees from members. Mastercard also operates the Cirrus ATM network.

Mastercard is currently expanding the software as a service (SaaS) aspect of its business model to compete with high-tech “disruptors” that are going after smaller businesses.

Discover Financial Services (NYSE: DFS)

Discover (market cap: $23.2 billion) is a giant worldwide electronic payment services company, as well as a direct bank, with roughly 21 million total merchant locations. About 12 million of these member point-of-sale merchants generate about 8% of their business outside of the U.S. and Canada.

Discover’s direct bank runs the Discover Card, the company’s flagship credit card business, and offers a wide range of banking services and products, such as personal and student loans, savings accounts, certificates of deposit, and prepaid cards.

Management also has forged close relationships with technology giants, to stay in step with the emerging “digital wallet” and the rise of mobile payments. Notably, Discover and Alphabet’s (NSDQ: GOOGL) Google (GOOG) have made it easy for customers to save their Discover cards to Google Wallet.

Read This Story: Our Alphabet Stock Prediction In 2019 (Buy or Sell?)

American Express (NYSE: AXP)

“Amex,” as its colloquially known, is differentiated from competitors Visa, MasterCard, and Discover by its upscale image and a strong presence in the international arena.

Amex (market cap: $90.8 billion) has been the laggard in the credit card space, in terms of adopting new technology. But the company is now consolidating its marketing operations to avoid duplicate infrastructure, resources, costs, and processes.

Amex has historically delivered value to investors with its brand image as the more upscale credit card, with a wider range of services for the more affluent consumer and traveler. But the company also has been branching out into new areas. OptBlue is a rapidly expanding initiative by Amex to get more small businesses to take the American Express card.

Although it has been late to the game, Amex has been developing new partnerships and services with cashless payment providers to capitalize on the convergence of online and offline commerce.

Will Visa Go Up In 2019 (Should You Buy)?

A quick argument why Visa is cheap and underpriced.

Some consumers still harbor misconceptions about Visa. The company does not issue cards, extend credit or set rates and fees for consumers. Instead, Visa provides financial institutions with Visa-branded payment products.

Visa is an all-pervasive brand best known for its eponymous credit card, but it’s also a diverse payments technology company that aggressively embraces the latest innovations in payments. Rather than get knocked off its perch as the largest company of its type in the U.S., Visa strives to co-opt threats on the horizon.

By being one of the early movers in the digital payment space, Visa has shown innovation and is geared to utilize various technologies to process payments in this new landscape.

In the recent past, Visa has been very successful in poaching big customers from rivals. Be it battling the competition where it hurts the most or changing the economics of the payment game, Visa is now at the top of its game.

The big technological “buzz” these days is over new ways to pay for goods and services via smartphone. The smartphone has revolutionized myriad aspects of our daily lives, so it was inevitable that this disruptive technology would affect the consumer’s point-of-sale experience as well. Given its size and sheer scale, Visa is the biggest beneficiary of its relationship with Apple Pay.

Read This Story: Our Apple Stock Prediction In 2019 (Buy or Sell?)

Visa links businesses with consumers in more than 200 countries through fast and secure electronic payments. VisaNet, its processing network, can reliably handle more than 30,000 transaction messages a second.

As payment through mobile becomes more popular, concerns are rising over fraud. Cybercrime is a growing threat around the world; companies such as Visa are expected to mitigate the problem and prove the safety of their systems. Lack of consumer trust can be fatal to a company such as Visa.

That’s why Visa has been in the forefront of cybersecurity. Notably, Visa was an early adopter of “smart cards.” These cards are embedded with integrated circuits that enhance security and help prevent fraud.

Throughout 2018, Visa consistently racked up robust quarterly earnings and revenue growth. In 2018, the number of Visa-network payment cards in existence grew by 4% to 3.35 billion. Now operating around the world are 1.1 billion Visa credit cards and 2.2 billion Visa debit cards.

Visa’s forward price-to-earnings (FPE) ratio is 23.2, reasonable compared to the FPEs of Mastercard (24.7) and Discover (65.9), albeit below that of struggling American Express (12).

Will Visa Go Down In 2019 (Should You Sell)?

The biggest threat to Visa isn’t disruptive technology or its main rivals. It’s macroeconomic trends, which pose risks to all companies in the financial services industry. The credit card business is cyclical and we’re now in the late stages of recovery.

Recoveries typically last about eight years, which suggests we’re overdue for an economic downturn. What’s more, the markets in recent months have undergone high volume and extraordinary volatility, a red flag for another market correction.

A multitude of lurking dangers threaten to derail the economy and demoralize consumers, including tit-for-tat tariffs, onerous international bank debt, saber rattling from North Korea or Russia, political dysfunction in Washington, DC., a messy Brexit… you name it. Headline risk is persistent this year and it could prompt nervous consumers to put away their credit cards.

Another worry for Visa: the company’s cross-border transactions slowed during the first quarter of 2019, largely due to geopolitical tensions and the trade war. Roughly 27% of Visa’s total revenue derives from international transactions; the bears argue that this trend could mushroom into a real problem.

Overall Visa Forecast And Prediction For 2019

I’m siding with the bulls on Visa.

As the world increasingly moves toward a cashless and checkless society, Visa’s status as the largest and most innovative electronic payments company positions it to benefit the most.

The rise of an affluent middle class in emerging markets, especially in Asia, also is a long-term boon for the company. Overseas consumers seek to mimic their counterparts in the West, which makes them increasingly prone to whipping out their Visas to buy goods and services.

What’s more, Visa’s attention to safety and security strengthens its relationships with cardholders, merchants and issuers, who look for trust in an electronic environment made insecure by cyber hacking and theft. Combined with recent strong operating results, this company’s inherent strengths make it a solid long-term bet on the payment revolution.

On January 30, Visa posted a robust earnings report for its fiscal first quarter of 2019 (ending December 31, 2018). Revenue reached $5.5 billion, for year-over-year growth of 13%. Adjusted earnings per share (EPS) hit $1.30, for a year-over-year increase of 21%.

Management’s latest guidance for 2019 calls for low double-digit revenue growth and EPS growth in the high teens. I’m not overly concerned about the slowdown in international transactions; they should pick up again when global uncertainty abates.

The average analyst expectation is for Visa to rack up year-over-year earnings growth of 15.2% this year, 16.4% next year, and 15.7% over the next five years (on an annualized basis).

Billionaire super investor Warren Buffett is a major shareholder of Visa, with a position worth $1.5 billion. Berkshire Hathaway’s (NYSE: BRK.A, BRK.B) stake in Visa is confirmation that this equity is among the most promising investments you can find amid a risky broader market. In the payment solutions realm, Visa still holds most of the cards.

John Persinos is the managing editor of Investing Daily.