Digital technology is changing the competitive landscape in e-commerce, payment networks, online lending, money transfers, business-to-business payments, personal finance and banking.
Fintech companies play in all these areas. So there’s a broad selection of fintech companies to buy and watch.
Industry incumbents face a wave of startups as well as new entrants such as Apple (AAPL) and Amazon.com. (AMZN) Innovation in digital and mobile payments is making cash and checks go away and someday may even eliminate plastic credit cards.
A battle is raging to draw in merchants to payment ecosystems, along with billions of dollars in transaction fees.
In banking, artificial intelligence is playing a role in detecting fraud. Cloud computing software is replacing paper-based systems in the business-to-business payment market. Blockchain technology could have an impact in the long-term.
Fintech Companies To Buy And Watch
Look for fintech companies with intellectual property that creates barriers for rivals. Also target fintech companies that are growing their total addressable market by expanding products and services.
Other financial metrics to watch include total payment volume and gross merchandise volume. The best fintech companies evolve to target larger markets.
PayPal Holdings (PYPL). Since its spinoff from eBay in 2015, PayPal has expanded from online checkout to mobile payments and person-to-person money transfers via its Venmo service. PayPal has a Composite Rating of 96. It has been added to the IBD 50 roster of fast-growing companies.
Euronet Worldwide (EEFT) is also a member of the IBD 50. While digital technology payments are on the rise, some companies are prospering with older fintech technology. Euronet runs automated teller machines around the world.
Payment Networks Adapting To Mobile Wallets, Apple Pay
Payment networks like Visa (V), Mastercard (MA) and American Express (AXP) may seem old hat with their plastic cards. But, the credit card networks are making sure they’re still used for online checkout systems like PayPal or mobile wallets like Apple Pay. Both Visa and Mastercard are in the IBD 50. Even so, Amazon looms as a disrupter in fintech just as in many other industries. The e-commerce giant is getting traction with Amazon Payments, which allows third-party merchants to improve checkout rates by letting shoppers pay with their Amazon account. It could evolve into a competitor to PayPal and the credit card networks.
Stripe Among Fintech Startups To Invest In
Venture capital funding of fintech startups will top $32 billion globally in 2018, says CB Insights. Funding is strong for startups in payments, e-commerce, online lending, and cloud software. Both Visa and American Express are investors in Stripe. It may launch an initial public offering in 2019. Stripe’s customers build its payment tools into their own smartphone apps and websites. Other well-funded startups include Kabbage, AvidExchange, and Symphony.
Square (SQ) went public at $9 a share in late 2015. It makes credit-card readers that plug into mobile phones and tablets. Square stock soared more than 1,000% from June 2016 through early October 2018, making it one of the most successful recent fintech IPOs.
B2B Among Fintech Companies To Invest In
The business-to-business payment industry is shifting from paper checks to automated software tools and digital platforms. Incumbents in the B2B payments market include Worldpay (WP), First Data (FDC), and Total System Services (TSS). Visa and Mastercard aim to expand from consumer, retail payments into parts of the B2B market. Coupa Software (COUP), AvidXchange, and Bill.com are among other new entrants. The B2B market also includes merchant acquirers such as Global Payments (GPN). These companies process card payments for specific business clients.
Cloud Financial Software A Fintech Trend
Financial software includes companies that make tools for banks, investment firms, insurers, tax preparers, and mortgage lenders. They include Intuit (INTU), Jack Henry & Associates (JKHY), and SS&C Technologies (SSNC). The biggest technology trend has been the move from on-premise software to subscription-based cloud services accessed via the internet.
Blockchain Figures In Fintech Future
The technology could play a role in securities clearing and settlement, digital identity and payments as soon as 2025, say the most bullish observers. Blockchain is the software technology behind Bitcoin and other cryptocurrencies. It’s a shared public ledger, which tracks transactions and ensures that the record of those transactions remains transparent and tamper-proof. Smart contracts are programmed into blockchains to automate tasks. One example would be processing insurance claims. Goldman Sachs (GS), JPMorgan Chase (JPM) and Bank of America (BAC) have been investing in blockchain technology.
