The combination of finance and technology has created the emerging idea known as fintech. The common objective for companies in this category is to apply technology to financial business. While you are likely aware of how businesses are rapidly adopting e-commerce, fintech has become even more important in an age of increasing financial inclusion.
What type of company might one say is a fintech company? This includes companies developing modern digital payment-processing solutions and those building and operating person-to-person payment applications.
The pandemic solidified provided a solid case for the role of tech in business and everyday life. As a result, technology stocks have soared in premium valuations. However, investors are no longer as keen considering the effects of rising inflation and interest rates. Therefore, they might prefer to offload stocks they’re wary about.
Even as higher-growth names in IT have been cashing out on their stock, some may prefer to bet long-term on the transformation that fintech companies are offering. This includes online and non-bank services (especially in emerging markets), easier access to credit, online payments, and the digitization of money.
Here are five of the top fintech stocks to consider for your portfolio.
Goldman Sachs (NYSE:GS)
Regardless of the stereotypes, you may hold, Goldman Sachs is fast losing its reputation as an old-school Wall Street business. The company is more enthusiastic about fintech than you’d care to imagine.
Goldman Sachs’ emerging business model makes it a full-featured consumer bank instead of the investment bank and wealth management firm for the 1 percent that it was only a few years ago.
The transition has been deliberate by any measure, beginning with the Marcus savings and personal loan platform, morphing into a credit card company in 2019 by virtue of being the exclusive issuer of Apple’s credit card. In addition, consumers can expect checking accounts and an investment platform as part of a slew of new products.
The company is also staying true to the core tenets of fintech operations by running a lean branch network and using technology to maximize efficiency and consumer value. As a result, it’s a less cyclical fintech stock as its investment banking core performs better in turbulent markets.
Green Dot (NASDAQ:GDOT)
Do you know what company pioneered the debit card? You probably thought Visa or Mastercard, but it’s little-known Green Dot that’s the correct answer – an excellent piece of trivia.
The company’s debit-card business is still relatively big, despite pressure from Paypal and Square. Like these companies, though, Green Dot has begun to offer new and innovative solutions in fintech by leveraging its banking charter and introducing a savings account with a 2 percent yield to Walmart Money Card customers.
In addition, it has appointed a CEO with exceeding experience to lead its banking efforts. Finally, it’s worth noting that Apple, Uber, and Stash are among companies using Green Dot’s BaaS or banking-as-a-service platform despite it being in its early stages.
Green Dot user companies offer banking products without being a full-fledged bank, and they enjoy its banking infrastructure to power their products.
Investing in Green Dot makes sense considering the banking-as-a-service platform’s growth potential.
Latin America seems to have a homegrown version of everything American. MercadoLibre is the continent’s answer to Amazon.com, so don’t be surprised if you hear the phrase “the Amazon of Latin America” in analysts’ descriptions of the company.
The company’s behemoth e-commerce division delivers promising growth outcomes that will impress the most nitpicky investor.
What makes MercadoLibre tick from a fintech perspective is its Mercado Pago payments platform. Every quarter, the company processes payment volume amounting to billions of dollars. However, processing payments outside MercadoLibre’s e-commerce platform has helped Mercado Pago grow faster.
In a refreshing twist of corporate counter-intuitiveness, MercadoLibre is partnering with Paypal will propel the company to the top of the Latin American fintech industry. The continent itself is largely unexplored in terms of payments, and Mercado Pago could well define the local industry for years to come.
It’s impossible to discuss fintech without acknowledging the role of Paypal as a trailblazer for digital payments. With more than 400 million consumers and merchants in 200 markets For more than twenty years, Paypal has weathered storms that have crushed others companies.
PYPL bets on accelerating e-commerce growth, with senior research analysts such as Edward Jones’ Logan Park declaring that it’s not easy to find another stock like it. Its Pay With Venmo on Amazon’s platform is launching in 2022, and the partnership is in tandem with growing online purchasing activity due to the pandemic.
Forty-seven percent of Venmo users prefer to use the platform at check out. Here are the words of the company’s 2020 Behavior Study. It may likely continue to deliver up to 20 percent on a long-term growth algorithm. These are stunning results for [prospective] shareholders.
Besides Venmo, Paypal’s services are expanding into “buy now, pay later,” crypto, peer-to-peer payments; this allows the 10,000 company to grow its 316-million user global digital payment footprint. In perhaps well-founded optimism, CEO Dan Schulman believes the company can soon grow to have one billion users.
In a few short years, Square, formerly known as Block, has made 21 important acquisitions, including Cash App and TIDAL. With $601.2 million in total funding, Jack Dorsey and his team have, over the years, helped the company to evolve its product from helping merchants to accept credit cards using their mobile phones to an individual and small-business financial ecosystem.
As an investor, you’ll do well to consider that Square processes card payments to the tune of an annualized rate of more than $100 billion. As a result, Square Capital, its growing small-business lending platform, rapidly wins over larger merchants and important small-business customers.
Cash App has effectively doubled its user base year on year and has massive potential to bolster its consumer financial service products. It’s also placing a premium on its rapidly growing Square Online Store. The platform helps Square’s merchants develop their omnichannel presence and enable curbside pickup in the post-pandemic era.
As fintech companies continue to make the news, it’s nice to note which of them is worth your investment. Many of these stocks have done well since the latter part of the pandemic. This article covers a mix of the old guard and the new, giving a fair weighting to companies from different eras leveraging technology to provide essential financial services for individuals and businesses.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only