Fintech is an abbreviation for finance and technology. It is a broad category that includes companies that apply new technology to financial services. Companies that create new digital payment-processing solutions, for example, are considered fintech, as are those that create and operate person-to-person payment applications.
Fintech’s potential is exciting. Even with the recent growth of the cashless payments space, most payment transactions around the world are still conducted in cash. Even though online banking institutions typically offer lower interest rates and fee structures than traditional banks, the majority of consumers still use branch-based banking for their financial needs.
Types of fintech stocks
Fintech is a broad term that refers to any company that uses technology in the financial sector. Fintech encompasses a wide range of businesses. They provide the following products and services:
- Payment processing
- Online and mobile banking
- Online and peer-to-peer (P2P) lending
- Person-to-person payments
- Financial software
- Financial services
Top five fintech stock investments for 2023
The recent stock market downturn has taken a heavy toll on many fintech stocks. Growth stocks have borne the brunt of the fall, and most fintechs fall into this category.
However, the fintech industry has a lot of long-term potential, so now is a good time to look for solid companies to hold for the long term. With that in mind, here are five fintech stocks to consider for your portfolio:
1. Block
Block’s (SQ -2.06%) product suite, formerly known as Square, has evolved from a way for merchants to accept credit cards using their mobile phones into a large-scale financial ecosystem for individuals and small businesses. The company now processes more than $200 billion in card payments annually, has its own banking subsidiary (Square Financial Services), and a thriving small business lending platform. Furthermore, with the acquisition of Afterpay, it has recently entered the buy-now, pay-later lending space.
Two major aspects of the company’s operations are particularly compelling. The first is its Cash App, which has 49 million active monthly users as of September 2022 and almost unlimited potential to expand its consumer financial service offerings. Direct deposits, debit cards, the ability to buy and sell Bitcoin (BTC -0.22%), and a user-friendly stock trading platform are already available on the platform. The second component is Square Online, a version of the company’s merchant platform that assists sellers in developing an omnichannel presence, which could be a great way for the company to capitalize on the surge in e-commerce adoption.
2. PayPal
PayPal Holdings (PYPL 0.56%) is the undisputed leader in online payments, among other things. Its Venmo person-to-person payment platform has emerged as an industry leader and is rapidly expanding its massive user base. PayPal has also acquired complementary businesses, such as the e-commerce tool Honey, and has invested in a number of other successful companies, including MercadoLibre (MELI 2.53%), Uber (UBER 0.35%), and others. PayPal has the financial flexibility to pursue opportunities as they arise, thanks to more than $1.8 billion in free cash flow generated in the most recent quarter alone.
PayPal has 432 million active accounts in over 200 countries worldwide. While user growth has slowed recently, PayPal is doing an excellent job of figuring out how to monetize its user base and still has enormous long-term potential. In a nutshell, this is a highly profitable industry leader that shows no signs of slowing down anytime soon.
3. Bank of America
This one may appear strange at first. Many people associate Bank of America (BAC -2.13%) with old-school banking, which is the polar opposite of fintech innovation.
However, there are several compelling reasons why Bank of America is more of a fintech than it appears. CEO Brian Moynihan and his team have done an excellent job of improving asset quality and focusing on efficiency in the years since the 2008-09 financial crisis. Technology has played a significant role. Bank of America was named the No. 1 bank for “Online Banking and Mobile Banking Functionality” by Javelin in 2022, as well as the “Best Consumer Digital Bank in the U.S.” by Global Finance. As more customers use the bank’s excellent digital channels, the business will become more efficient. Bank of America is an out-of-the-box fintech with a lower valuation than many other large banks and a 2.6% dividend yield.
4. Adyen
Adyen (ADYE.Y 2.4%) isn’t a household name among most US investors, but it belongs in the same conversation as Block and PayPal.
Adyen, headquartered in the Netherlands, offers payment processing solutions to businesses worldwide, with a strong presence in the United States. It provides payment options for in-store, online, and mobile channels. Adyen, on the other hand, focuses almost entirely on large businesses, unlike the other major payment processing tech companies. Adyen serves as a payment processor for Microsoft (MSFT 1.84%), Uber (UBER 0.35%), and McDonald’s (MCD -0.41%). You may recall that eBay switched from PayPal to Adyen as its preferred payment processor a few years ago.
Adyen’s expansion has been impressive, with the company processing more than $700 billion in annualized payment volume as of mid-2022. Furthermore, Adyen is highly profitable, with a 59% EBITDA margin that could improve as the company grows.
5. MercadoLibre
MercadoLibre (MELI 2.53%) is frequently referred to as the Amazon.com (AMZN 4.26%) of Latin America, and the moniker fits. The company has a massive e-commerce business, with annualized merchandise sales volume of well over $30 billion, and it is growing at an impressive rate. In addition, the company has a logistics platform (Mercado Envios) and a lending business (Mercado Credito), both of which have grown significantly in recent years. Mercado Credito stands out, with 146% year-over-year growth in the most recent quarter.
However, the Mercado Pago payments platform is the most exciting from a fintech standpoint. The company processes more than $120 billion in annualized payment volume and is growing much faster than e-commerce. The fact that Mercado Pago is growing faster when it comes to processing payments outside of MercadoLibre’s e-commerce platform is particularly encouraging. Consider Mercado Pago to be an earlier-stage PayPal (remember when it was a part of eBay?) that is beginning to develop into an impressive business in its own right.
FOR MORE INFO CLICK THIS SITE:https://learningsharks.in/
FOLLOW OUR PAGE:https://www.instagram.com/learningsharks/?hl=en