Fintech’s Finest: 7 Stocks to Buy for the Future of Finance

The fintech industry is filled with promising stocks that challenge the way we look at finances. Some of these firms offer more competitive rates and terms than traditional banks. Others are riding financial trends to higher returns for their shareholders.

Digital banks are becoming more widely used which can lead to significant appreciation in the long run. While investors can choose from many fintech stocks, these top picks have a lot to offer.

American Express (AXP)

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American Express (NYSE:AXP) continues to soar after an impressive Q1 earnings report. Revenue increased by 11% year-over-year while net income was up by 34% year-over-year in the quarter. The fintech firm has also demonstrated that it can attract younger consumers. More than 60% of the new consumer account acquisitions were Millennials and Gen Z consumers.

The stock is up by 26% year-to-date and has gained 107% over the past five years. It trades at a 19.5 P/e ratio and offers a 1.18% yield. American Express has done a nice job of raising its dividend over time. The firm recently announced a 17% dividend hike. American Express has maintained an annualized dividend growth rate of 10.51% over the past decade, so the recent hike is a pleasant surprise.

American Express should continue to generate returns as people use their credit and debit cards to buy products and services. The fintech firm makes a small percentage of every transaction.

Robinhood (HOOD)

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Robinhood (NASDAQ:HOOD) is innovating in the fintech industry. The company has several products and upcoming releases that are challenging how financial firms reward their customers. 

Robinhood forced many brokerage firms to remove stock trading fees, and Robinhood Gold is going to lead to many changes as well. This membership has 5% interest for uninvited cash, zero interest for the first $1,000 of margin you borrow, and a 3% IRA match on eligible contributions. The Robinhood Gold Card also offers unlimited 3% cashback on every purchase without any annual fees. No other credit card has that offer.

You can even earn 1% extra on every deposit. Robinhood has a compelling range of services and perks that allow it to trounce what other banks are offering. Other financial institutions will have to offer similar incentives to keep up. Robinhood stock has been generating solid returns recently. It’s up by 67% year-to-date.

Nu Holdings (NU)

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Nu Holdings (NYSE:NU) is a Brazilian digital bank that has surged by 47% year-to-date amid rising net profit margins and strong demand. The stock has a 46 P/E ratio which is higher than most bank stocks, but Nu Holdings makes up for it through strong financials.

Nu Holdings closed the first quarter of 2024 with 99.3 million customers. That’s a 26% year-over-year improvement. Financials also exhibited impressive growth rates. Revenue increased by 69% year-over-year while net income was up by 167% year-over-year.

The digital bank offers many financial products — credit cards, bank accounts, investment portfolios, loans, and insurance policies. The bank has 17.0 million active investments customers which is an 85% year-over-year improvement. Active customers came to 82.6 million which is a 27% year-over-year increase. As customers become more active across multiple offerings, Nu Holdings should continue to reward long-term investors. Nu Holdings is currently rated as a “Strong Buy” with a projected 12% upside from current levels.

Visa (V)

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Visa (NYSE:V) is a leader in the credit and debit card industry that has a market cap above $500 billion. The fintech firm has a realistic chance at becoming a $1 trillion company before 2030. 

Visa makes money from each credit and debit card transaction. The business model has translated into solid financial growth. Revenue increased by 10% year-over-year while GAAP earnings per share rose by 12% year-over-year. Visa also reported 8% year-over-year payments volume growth with cross-border volume up by 16% year-over-year.

The company has performed well in the stock market. The stock is up by 5% year-to-date and has gained 68% over the past five years. Visa trades at a 33 P/E ratio and has a 0.77% yield. The firm recently hiked its quarterly dividend from $0.45 per share to $0.52 per share. That’s a 15.6% year-over-year increase. The firm also has an annualized dividend growth rate of 15.93% over the past five years.

SoFi (SOFI)

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SoFi (NYSE:SOFI) has been gaining momentum as more people become open to doing their banking with digital platforms. SoFi closed the first quarter with 8.1 million members. The company grew its member base by 44% year-over-year which included an additional 622,000 in the first quarter.

The rapid acceleration in members also translated into improved financials. Revenue increased by 37% year-over-year to reach $645.0 million while net income came to $88.0 million. For comparison, SoFi reported a net loss of $34.4 million in the same period last year. SoFi is attracting consumers with high credit scores. Among the direct deposit accounts opened in the first quarter, the median FICO score was 744.

SoFi has had plenty of ups and downs as a stock. It’s down by 28% year-to-date while exhibiting a 1-year gain of 15%. Rapidly expanding profit margins, a solid product catalog, and millions of members indicate that the stock can be on the cusp of a sustained rally.

PayPal (PYPL)

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PayPal (NASDAQ:PYPL) offers growth at a reasonable price after many investors gave up on the stock. It only trades at a 15.5 P/E ratio after dropping by roughly 80% from its all-time high. Shares are flat year-to-date.

The company reported good financials to start off 2024. First quarter revenue increased by 9% year-over-year while GAAP EPS was up by 18% year-over-year. PayPal anticipates revenue to grow by 6.5% to 7%. GAAP EPS is expected to dip from $3.84 in fiscal 2023 to $3.65 in fiscal 2024, marking a 5% year-over-year decline.

PayPal has more than 400 million users and recently tapped into a new opportunity to increase the annual revenue per user. PayPal’s upcoming advertising business can increase profit margins and bring more attention to the business. 

PayPal will use customer data to offer targeted ad campaigns in a move that can boost its finances for several years. PayPal is valued as if the ad segment won’t come to fruition, but if the ads start to take off, PayPal stock will deserve a higher valuation.

JP Morgan (JPM)

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JP Morgan (NYSE:JPM) is one of the oldest and most established financial institutions. It was founded in 1871 and has been outperforming most of the big banks. Shares are up by 16% year-to-date and have gained 88% over the past five years. The stock trades at a 12 P/E ratio and comes with a 2.30% yield.

The financial institution achieved a 17% return on equity in the first quarter and also announced a 10% dividend hike. JP Morgan also bought back $2.0 billion worth of common stock. Net revenue came to $41.9 billion which was 9% higher than in the same period last year. The company’s net income of $13.4 billion is 6% higher than that of the same period last year. 

JP Morgan is positioned to thrive in a period with elevated interest rates. Not every bank will fare well, and smaller ones may have to shut down. If that happens, more consumers will put their money into reliable firms like JP Morgan that have withstood more than 100 years of economic cycles and market volatility.

On this date of publication, Marc Guberti held a long position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.