Investing.com -- Bank of America reinstated coverage of several payment companies, saying steady transaction growth and wider use of digital payments continue to support the sector despite recent pressure on sentiment.

The bank said its outlook for the group remains broadly constructive, pointing to expanding digital commerce, improving cross-border spending and continued migration away from cash.

Among the companies it covers, BofA sees the strongest risk-adjusted opportunities in card networks Visa and Mastercard, both rated Buy.

The bank said the networks benefit from durable earnings, resilient fee structures and strong cash flow as electronic payments gain share globally. It added that the model remains largely insulated from potential disruption from artificial intelligence, while recent stock weakness tied to regulatory and macro concerns has created entry points.

In digital wallets, BofA rated Block Inc. Buy with an $88 price target and PayPal Holdings Neutral with a $48 target.

The bank said Block enters 2026 with a lower cost base after a recently announced 40% workforce reduction tied to AI initiatives, alongside improving trends in its Square and Cash App businesses.

PayPal, by contrast, faces what BofA described as a “fundamental reset,” citing slowing growth in branded checkout. The company’s large scale and strong free cash flow provide support, though the bank said visibility on future growth remains limited. Press reports have also suggested PayPal or some of its assets could draw acquisition interest from payments rival Stripe.

BofA also restarted coverage of buy-now-pay-later providers Affirm Holdings and Klarna, both with Buy ratings.

The bank said Affirm benefits from steady gross merchandise value growth, disciplined underwriting and wider distribution, including partnerships with Amazon and Shopify. Klarna, meanwhile, is gaining momentum in the United States and posting faster gross-profit growth, though near-term guidance and an upcoming lock-up expiration could add volatility.

BofA said buy-now-pay-later services remain well positioned to gain share as adoption rises across online commerce.