The vision of 20-somethings writing disruptive code typifies the popular understanding of fintech. While brash young start-ups are a part of the scene, a better way to make money is to select established, profitable companies whose businesses will be driven by fintech. Here are some of my favorites.
PayPal may be the original fintech company. The company started life as something called Confinity with ownership among a who’s who list of Silcon Valley notables, including Elon Musk, which was acquired by eBay in 2002 before it was spun out by eBay in 2014.
Through it all, PayPal has concentrated on two very basic functions: payment processing and money transfer. This latter function has gained new currency as younger consumers coming of age around the globe rely almost exclusively on mobile payments. Research firm Statistics reported that revenues from mobile payments is expected to grow from $450 billion to more than $1 trillion in 2019. Estimated revenues for 2018 are $930 billion. PayPal will continue to ride the coattails of this trend.
The spinoff from eBay has added some uncertainty to PayPal revenues in 2020 and beyond. PayPal will continue to provide so-called “branded” processing for eBay, along with other providers, but will no longer provide the in-house, or so-called unbranded processing. This will ding PayPal revenues, but organic growth in other areas will, in my view, more than overcome the revenue loss from eBay.
I like Intuit INTU +0.36% because it’s big — the market cap is $54 billion — pays a dividend, and developed a stable growing business long before the word fintech was ever uttered.
