12 Jun 4 Fintech Stocks With Strong Growth Potential
Financial technology, or fintech, continues to amaze consumers with products and services that offer greater convenience to our everyday lives.
An increasing number of new fintech companies are rising up to create new market opportunities by targeting financially underserved customers with innovative products.
Meanwhile, existing kingpins seek to expand their service offerings and deepen network synergies as they jostle for market share.
However, the rapid growth of the fintech industry means that multiple winners can emerge.
Here are four more fintech companies that can drive your stock portfolio to greater heights.
Fiserv (NASDAQ: FISV)
Fiserv is a global fintech and payments company that provides solutions related to payment processing, customer management and banking services, among others.
The company processes more than 12,000 financial transactions per second and counts nearly 10,000 financial institutions as its clients.
Fiserv’s strength lies in the synergistic value across its various services.
In its latest quarterly report, the company reported cost savings to the tune of US$129 million, along with a revenue boost amounting to US$39 million.
In the quarter, Fiserv reported that revenue grew 4% year on year to US$3.6 billion, although net income fell 22.4% year on year to US$304 million, due to a gain from sale of business in the first quarter of 2020.
In 2019, the fintech company merged with First Data, a leading payments provider.
The merger included First Data’s Clover platform, a business management and point-of-sale platform that can accept various payment options, track inventory, schedule appointments and market to customers.
In the first quarter of 2021, gross payment volume (GPV) processed by Clover grew 36% year on year.
The company also recently acquired Ondot Systems, a digital experience platform for financial institutions, and Pineapple Payments, a payment processing company.
These acquisitions will add on to its capabilities to offer a more diverse set of services to its clients.
Lemonade (NYSE: LMND)
Lemonade is an American insurance company that uses artificial intelligence and behavioural economics to power its operations.
The company sells its customizable insurance policies online and through its mobile app, and processes applications within minutes.
What differentiates Lemonade from its competitors is its unique business model.
While traditional insurance companies derive their profits from what is left after paying for claims and expenses, Lemonade instead charges a flat fee, and donates leftover premiums to charities through the Lemonade Giveback programme.
This practice ensures that Lemonade has no conflict of interest when debating claims, and can pay out claims to customers more quickly and with less hassle.
Lemonade reported strong numbers in its latest letter to shareholders, with total customers growing by 50% year on year, and gross earned premium jumping 84% year on year.
In the letter, the insurer also announced that it would be launching car insurance products, venturing into a market worth US$300 billion.
Affirm Holdings (NASDAQ: AFRM)
Affirm is another American fintech company that specialises in providing buy now, pay later (BNPL) services to consumers.
The company differentiates itself by being upfront and transparent about what the customer must pay in total, and never charges late or annual fees.
In addition, the company offers customers a flexible payment schedule to suit their preferences.
Not only is BNPL a rapidly expanding market, this concept also helps to drive more sales for Affirm.
By reducing the upfront cost of purchases, BNPL services make purchases seem more affordable, thus encouraging consumers to spend more.
According to a Worldpay report by Fidelity National Information Services (NYSE: FIS), BNPL transactions accounted for 2.1% of e-commerce transactions worldwide, and the BNPL market is expected to double by 2024.
Another BNPL company, Klarna, reported that BNPL helps merchants improve checkout rates by 30% and increase average order size by 58%.
In Affirm’s latest quarterly report, the financier posted impressive figures across multiple metrics.
Gross merchandise volume increased by 55% year on year, while the company’s active consumer base grew 52% year on year to reach 4.5 million.
The increased activity also boosted revenue in the quarter to US$204 million, a 57% year on year improvement.
Square (NYSE: SQ)
Square is a fintech behemoth most famous for its initial foray into financial disruption.
In 2009, the company introduced a device that allowed small businesses to accept card payments by driving down transaction fees.
The payments company continued to expand its financial product offerings, most notably with Cash App, a mobile payments platform that can be used to transfer money to friends, invest in stocks, and even buy cryptocurrencies.
Square also runs Seller, an ecosystem of solutions that helps merchants start and grow their businesses.
In the first quarter this year, Cash App’s gross profit surged 171% year on year, while Seller’s gross profit advanced by a respectable 32% year on year.
Most recently, Square announced the acquisition of a majority stake in music streaming company Tidal for an eye-catching US$297 million.
The company hopes that Tidal can complement its existing offerings and help it to build new revenue streams.
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Disclosure: Herman Ng does not own shares in any of the companies mentioned.