Wise (LON: WISE) share price has bounced back in the past four straight days as investors assess the ongoing rollout of Zing, a new product by HSBC, the seventh biggest bank in the world. The stock has rebounded from the year-to-date low of $784 to a high of $832. It remains about 8% below the highest point this year.
Is Zing a real threat?Wise stock retreated sharply in January after HSBC announced the launch of Zing, a product that has a close resemblance to its platform. According to its website, Zing offers an easy way for people to send money around the world. It also provides a multi-currency card that allows customers to hold cash in 10 currencies.
Zing also has a platform that lets customers convert money using the real-time exchange rate that is listed in Google. This is a major issue since most money transfer companies make money by offering a low-cost option but at a bad exchange rate to customers.
HSBC has launched Zing in the UK and it now plans to expand it internationally. As a result, it hopes to take a slice in one of the biggest industries in finance. Remittances have grown rapidly as many people migrate from emerging and developing countries to developed ones in Europe and the United States.
HSBC’s benefit over Wise is that it has a stronger balance sheet considering that it holds almost $3 trillion in assets. It also has a presence in 62 countries and already serves over 39 million customers around the world.
However, I believe that Zing will not dent Wise’s market share. While Zing is just a small part of HSBC, Wise only focuses on payments and is already a well-known brand around the world. Also, Wise already exists in a highly competitive industry.
The most recent results showed that Wise’s business is still firing on all cylinders. Its active customers jumped by 30% in the six months to September. It reached 7.2 million customers and moved over 57.2 million pounds. It expects that its income for the year will be up by between 33% and 38%.
Wise is benefiting from the ongoing migration and high interest rates in key countries. It benefits because it has billions of pounds in cash, which it is making money with. It had over 9 billion pounds in cash and equivalents. It made over 211 million pounds in interest income in the last half of the year.
Historically, an entry of a big company does not necessarily hurt existing companies. For example, a company like Walmart has thrived despite the ongoing talk of Amazon’s threat. Similarly, Spotify has thrived even though Apple and Google are competitors. This view was confirmed by an analyst who told Bloomberg:
“The track record isn’t great for incumbent banks launching standalone international payment platforms.”
Wise share price forecast
On the daily chart, we see that the Wise stock price dropped sharply after HSBC unveiled its Zing product. Most recently, the shares formed a morning star candlestick pattern, which is a popular sign of a reversal. It is now trading inside the 50-day and 25-day EMAs. The Relative Strength Index (RSI) has pointed upwards and is nearing the neutral point at 50.
Therefore, while the stock could have some volatility, I suspect that the shares will do well over time. If this happens, the stock could rebound and retest the key resistance point at 905p, which is about 8.7% above the current level.
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