The Next Revolution in America Is Already Underway

Leaving your wallet at home... The next revolution in America is already underway... Following China's blueprint for the 'future of money'... Why some places are banning stores from doing this... One hard-to-ignore fact about this megatrend... A simple way to 'play the field' in the years ahead...

After I (Chris Igou) double-checked my pockets, my anxiety began to set in...

Then it hit me. My wallet was sitting on my dining room table, right next to the bowl of fake lemons.

I was prepared to do the "walk of shame." I had no money. I had no credit card with me. And I could feel the glares coming from the five people waiting behind me in line. All I wanted was a cup of coffee from Starbucks...

I thought at that point it was best to just avoid eye contact. But right before I was ready to leave the store, I realized I had my phone. Not just to call someone, though...

I remembered that Starbucks accepted Apple Pay.

I grabbed my phone and put it up to the reader next to the cash register. In less than four seconds, my coffee was paid for and I was on my way.

I didn't need my wallet, any cash, or a credit card. All I needed was my phone. And it was much easier than digging through my wallet or keeping up with loose pocket change.

Mobile payments are still relatively new in the U.S., but that's starting to change...

I live in a small town outside of Jacksonville, Florida, with a population of less than 13,000. And yet, I can still pay for coffee at the local Starbucks with my smartphone.

Four in five American adults own a smartphone today. And that number will only grow from here. Like me, these folks can all pay at many places without their wallets, cash, or credit cards.

The foundation for mobile payments has already been laid... Tech giants like Amazon (AMZN), Apple (AAPL), and others are all focusing on getting consumers to move to a more cashless society right now.

Today, I'll share the blueprint we're following toward a cashless society... show you how the mobile-payments revolution in the U.S. is already underway... and give you an easy, "one click" way to make money as this megatrend plays out over the coming years.

To see a good example of a cashless society, look no further than China...

Walking into a restaurant in China might feel like stepping into the future if you're a visitor.

In some places, you won't see any cashiers or servers. No cash exchanges hands. And you certainly won't find any paper receipts.

As longtime Digest readers know, my friend and colleague Dr. Steve Sjuggerud takes regular trips across the globe to China. He has seen this amazing revolution with his own eyes. And as Steve told his True Wealth subscribers in the April 2017 issue...

I wouldn't have believed in this "cashless society" idea if I hadn't seen it firsthand. I never imagined that I'd see the future of money for the first time in Beijing, China. But I did... in our very first meeting in Beijing last summer...

The executive across the table from us told us that she doesn't carry a wallet or a purse. She doesn't carry any money or credit cards, either. Everything she needs is on her phone – everything.

She is not alone. What she does is "normal" among businesspeople in Beijing.

In the past two years, paper money has almost been completely replaced by mobile phones in China's major cities.

You see, China went from basically a cash-only society to a massive user of mobile payments in a little more than five years. Today, more and more stores are popping up with no cashiers. And cash is becoming increasingly irrelevant in China's major cities.

It's a great example of how this unstoppable trend will likely play out at home...

In China, nearly half of the population used mobile payments in 2018 – up from almost nobody in 2011.

Mobile payments didn't really exist in China only five years ago. But if you owned the winners of this revolution in China, you would've made big gains in just a few years...

Investing in the winners of China's move to mobile payments has led to big returns...

Technology companies Tencent (TCEHY) and Alibaba (BABA) have already won in the mobile-payments space in China. Together, these two companies see more than 90% of Chinese mobile payments run through their services.

Let's start with Tencent...

It's the parent company of Chinese super app WeChat, which launched in 2011.

WeChat is like Facebook, messaging, payments, and more all wrapped up into a single app. You can do just about everything without ever leaving WeChat – including paying for your coffee... and almost anything else you can imagine.

More than 1 billion people use WeChat. In 2011, that number was only 50 million. That's incredible!

Tencent's value has soared alongside WeChat's rapid growth... The company's stock is up roughly 1,100% since the end of 2011. Meanwhile, U.S. stocks are up about 130% in that span.

Alibaba is the other major player in mobile payments in China...

Its mobile-payments app, Alipay, is WeChat's main competitor. It has more than 700 million active users in China.

Alibaba's stock has only been publicly traded since September 2014. But that hasn't prevented it from rallying more than 150% since its inception.

Again, Alibaba and Tencent have won the mobile-payments revolution in China. And because of that, these companies' stocks have soared in recent years.

Here in the U.S., the same sort of revolution is beginning to unfold...

In 2018, 55 million people in the U.S. used mobile payments. By the end of this year, that number will rise to nearly 62 million. But that's still less than 20% of the population.

Mobile payments are no longer just a futuristic idea for American citizens. We're seeing real growth in folks using mobile payments. However, the largest growth opportunity is still ahead...

Again, as I said earlier, four out of every five American adults owns a smartphone. That means roughly 202 million people have access to mobile-payment apps such as Apple Pay, Google Pay, and more.

But today, the number of Americans using mobile payments only makes up a small fraction of that. And companies like Apple and Starbucks are working to change that right now...

Major U.S. companies are leading the push into mobile payments...

In late March, Apple unveiled its new "Apple Card" in partnership with financial giant Goldman Sachs. It's like a lot of other credit cards in that it offers a lousy 1% cash back on all transactions with the physical card. But that's not the interesting part...

The Apple Card also offers 2% cash back when you purchase goods using Apple Pay.

In other words, the card will reward folks who use Apple's mobile-payments system. The company expects the Apple Card to come out later this year. And while we don't know how well it will do, it's clear the company is focused on driving its mobile-payments app.

Apple isn't alone in this push, either...

Restaurants like Starbucks and Panera Bread have offered reward points through mobile payments.

Amazon even came out with plans to open up to 3,000 "Amazon Go" stores by 2021 that rely on mobile payments. These stores don't have any cashiers. You just grab your things and walk out the door. You're charged what you owe through an app on your smartphone.

They're another great example of how America is moving toward mobile payments faster than you think. But these types of stores haven't avoided pushback in some parts...

The U.S. is still years away from becoming completely cashless...

A large chunk of the U.S. population still doesn't have access to mobile payments. As of 2017, about 14 million Americans didn't have a primary bank account – around 6.5% of all U.S. households. It makes doing any online transaction nearly impossible for these folks.

To protect these people, some places have banned stores from going completely cashless...

Philadelphia passed a law earlier this year to become the first major city to force stores to accept cash. It'll officially go into effect on July 1, with fines of up to $2,000 on businesses that don't take cash.

New Jersey followed shortly after, becoming the second state to ban cashless retail stores and restaurants. (Massachusetts has banned them since 1978.)

And just this week, San Francisco joined Philadelphia as the second major city to require brick-and-mortar retailers to take cash as payment.

Because of the backlash toward cashless transactions, Amazon said it plans to add a cash payment option at its Amazon Go stores in the near future.

In the U.S., we can't completely get rid of cash overnight...

This is a significant shift. And it will likely create more controversy along the way. But these new laws are also signs that mobile payments are not a part of the future anymore...

They're a part of American society right now.

And even if the massive push from companies like Amazon or Apple isn't wooing you over to this developing revolution, the next fact is hard to ignore...

Mobile payments are much safer and more secure than paying with credit cards or cash...

This is where Americans' perceptions are furthest from reality. In April 2018, a report from New York-based startup Global Acceptance Transaction Engine showed that 43% of Americans said they believed cashless payment options aren't secure.

But that simply isn't the case... You see, one thing makes mobile-payment options among the safest ways to handle a transaction. It's called "tokenization."

It sounds technical. But all you need to know is that it means your personal payment information never gets used...

Through the tokenization process, a unique number is generated that won't be used again. This digital representation – or "token" – takes the place of your actual card information.

Swiping a credit or debit card still makes your names, card numbers, and expiration dates vulnerable throughout the payment process. Hackers can grab your data from the stores' databases. We've seen this play out time and time again over the past several years.

Using a mobile-payment app is far superior to swiping a card in terms of security.

This concern about safety is another reason why mobile payments have such strong growth potential in the years ahead. Americans haven't completely bought into using mobile payments yet. But as more folks realize it's safer than a credit card, they'll make the switch.

Unlike China, we don't see a clear winner in the mobile-payments revolution in the U.S. just yet...

Apple and Alphabet (GOOGL) – the parent company of Google Pay – are both early movers in the space. We also have PayPal's (PYPL) mobile-payments app Venmo... It's an easy way to pay your friend back for buying you lunch without the awkward process of getting exact change.

Venmo has roughly 40 million users today. And its payment volume grew by 73% in the first quarter of 2019. It's growing at a rapid pace and is poised to succeed moving forward.

We're still in the early stages of this revolution, so it's too soon to know who will come out on top when it's all over. But that's OK...

You don't need to know exactly who the winners will be in order to capitalize as this megatrend plays out from here. If you don't want to gamble on which company will dominate the market over the next three to five years, you can "play the field"...

There's a simple way to own the companies that will likely benefit the most from this revolution. I'm talking about the ETFMG Prime Mobile Payments Fund (IPAY).

IPAY is an exchange-traded fund that you can buy like any stock...

Now, this fund doesn't hold the tech giants like Apple or Google. Those companies are simply too big for their mobile-payment segments to move the needle.

Instead, its top holdings include companies that focus on mobile payments. For example, PayPal, Square (SQ), and Global Payments (GPN) are all in IPAY's top 10 holdings. So are credit-card giants Visa (V), Mastercard (MA), and American Express (AXP).

It's a one-click way to take advantage of the broad uptrend in mobile payments...

You don't need to pick the winners to make money as mobile payments become more popular in America in the years ahead. You can play the field. If you're looking to take advantage of the opportunity in this revolution, IPAY is the simplest way to do it.

New 52-week highs (as of 5/8/19): Match Group (MTCH).

In today's mailbag, another subscriber writes in about Porter's Friday Digest on corporate bonds. What's on your mind? Tell us at feedback@stansberryresearch.com. Remember, we can't offer individual investment advice, but we do read every e-mail.

"I am a current subscriber [of Stansberry's Credit Opportunities], and I am a more than satisfied customer. The newsletter offers great opportunities, and yes I have to make a choice on whether to purchase the bond that is being presented. And when I do make the decision to buy, it is a very simple process. Go online, enter the CUSIP number and select the quantity to purchase, and then push the 'enter' button on my computer. Although, I still have to perform my finger exercises so I can push the 'enter' button on my computer without cramping up.

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Regards,

Chris Igou
Jacksonville, Florida
May 9, 2019