Fintech
These could be the best-performing Fintech stocks through 2030
Fintech stocks aren’t exactly a new stock category. Money-related companies (such as banks and brokers) have embraced technology as a means to better serve their customers since the advent of the World Wide Web in 1989.
The financial technology sector is still rapidly evolving and could look significantly different in five years.
To that end, here’s a roundup of the three fintech stocks that could prove to be the best performers through 2030. Each company is perfectly positioned to capitalize on an opportunity that is not only sizable, but also undervalued.
SoFi Technologies
Online banking is nothing new. But it is not out of place to suggest most of the majors banks they are still struggling on this front. Their digital offerings often feel like afterthoughts and don’t necessarily mesh well with their physical presence.
That’s not the case SoFi Technologies (NASDAQ: SOFI), however. It has been built from the ground up since its launch in 2011 to be an online bank. In fact, it has no physical branches; it’s strictly an online-only outfit. It still has all the offerings you would expect from a more traditional bank, including loans, checking accounts, investments, deposits and credit cards, to name a few.
The fact is that its online-only service is more than enough to attract an increasingly larger audience. At the end of the first quarter it boasted just over 8.1 million customers, which was 44% more than in the same period last year. In fact, SoFi has added customers in every quarter since the beginning of 2020, when it only served just over 1 million members.
This is still just the beginningHowever.
You see, as much as the world (and North America in particular) has embraced the idea of managing banking matters online or through an app, we’re at something of an inflection point. That is, today’s young adults have never known a world without the Internet; most of them don’t even remember a world without smartphones. This crowd is completely comfortable with the idea of not having access to a physical bank branch. In fact, a recent survey conducted by the American Bankers Association indicates that 74% of millennials prefer digital banking services over in-person services, while 64% of Gen-Z say the same. This is in contrast to older consumers, most of whom will do their banking online or with an app, but aren’t exactly enamored with the idea of not having a physical branch to visit when needed.
It matters simply because, according to Pew Research, millennials have recently become the largest segment of the U.S. population and are entering their highest-earning wealth-building years. Don’t be surprised to see SoFi’s customer growth rate accelerate from here.
The story continues
PayPal holdings
PayPal holdings (NASDAQ: PYPL) isn’t just a fintech stock. It is probably the original name of the fintech, launched in 1998 to help the then nascent eBay start online marketplace and e-commerce business. For years it was the only player dedicated to payments technology.
Of course, serious rivals have also made their way onto the market in the meantime. To blockThe e Cash App Adyen come to mind as direct competitors, even if the alternatives are popular Amazon Pay and a handful of cryptocurrency wallets have also dented PayPal’s share of the payments intermediary market. The COVID-19 pandemic only shone a spotlight on these other payment options, as much of the world’s commerce was suddenly being handled online.
However, with all this dust finally settling, something curious is becoming clear. PayPal is still the leader of the payment platform market and is still growing. The company facilitates nearly half of the world’s online purchases, but still managed to increase total transactions last quarter by 11% to 6.5 billion. This growth follows last year’s 12% increase in the amount of total payment volume handled by PayPal.
How does the aging company hold up so well in such a competitive environment?
Much of this resilience can be attributed to the fact that it was first to market. The world is familiar with the brand and its offerings, and therefore is comfortable staying with PayPal even if alternatives are available: it is easier to keep a customer than to win a new one.
It’s also worth noting, however, that PayPal probably uses its whopping 200 petabytes of digital data better than any of its competitors, direct or indirect. This is something CEO Alex Chriss plans to do even more aggressively now that AI tools can make it even more useful.
The kicker: Newcomers will get into PayPal stock while its price is only 16 times higher than trailing earnings per share. For perspective, the S&P500‘s current price-to-earnings ratio stands at 23 times its earnings.
MasterCard
Last but not least, add MasterCard (NYSE: MA) to your list of fintech stocks to buy for their superior performance potential between now and 2030.
No, it’s not a highly regarded fintech name. This is because it has been so well defined over the past few decades as a credit card processor. Don’t be fooled though. While it is still first and foremost a card payments intermediary, it is leveraging the power of technology to continue expanding its business.
Let’s take its Labs-as-a-Service division as an example. This arm aims to “co-innovate with customers to deliver impactful, customer-centric experiences by creating innovative products, platforms and services.” This unit co-created Emirates airline’s customer rewards program, for example, while Mastercard’s so-called Test & Learn technology allows retailers to determine which products are most in demand and then stock them accordingly. Mastercard was also one of the first names to embrace the idea of cryptocurrency-based digital wallets, even without knowing what the future of cryptocurrencies would be. These and many other overlooked innovations are only made possible thanks to the advent of the right technologies, which Mastercard will gladly employ when there is a good reason.
Strengthening this opportunity is the frequency with which cash is still used to buy and sell goods and services. The US Federal Reserve reports that approximately 18% of all payments made in the United States are made in cash, while another 13% are direct bank transfers. These are transactions that would probably be better handled with a modern debit or credit card.
On that note, Mastercard’s expected revenue growth of 11% this year is followed by next year’s expected growth of more than 12%. This is significantly better than the growth rates of most other companies over the same time frame. It’s also a pace of growth that will be sustainable for at least the next few years, as Mastercard continues to figure out how to best leverage new technologies.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the securities mentioned. The Motley Fool has positions and recommends Adyen, Amazon, Block, Mastercard and PayPal. The Motley Fool recommends eBay and recommends the following options: long January 2025 $370 calls on Mastercard, short January 2025 $380 calls on Mastercard, short July 2024 $52.50 calls on eBay, and short June 2024 $67 calls .50 on PayPal. The Motley Fool has a disclosure policy.
Prediction: These could be the best-performing Fintech stocks through 2030 was originally published by The Motley Fool