These Could Be the Best-Performing Fintech Stocks Through 2030
Fintech stocks aren’t exactly a new category of equities. Money-related companies (like banks and brokers) have embraced technology as a means of better serving their customers since the advent of the world wide web in 1989.
The financial technology business is still rapidly evolving, and could look considerably different in five years.
To this end, here’s a rundown of the three fintech stocks that may well end up as the best performers through 2030. Each company is perfectly positioned to capitalize on an opportunity that’s not only sizable, but underestimated as well.
SoFi Technologies
Online banking isn’t anything new. But it’s not out of line to suggest most major banks are still struggling on this front. Their digital offerings often look like afterthoughts, and don’t necessarily mesh well with their brick-and-mortar presence.
That’s not the case for SoFi Technologies (NASDAQ: SOFI), however. It’s been built from the ground up since its 2011 launch to be an online bank. It has no brick-and-mortar branches, in fact; it’s strictly an online-only outfit. It still has all the offerings you’d expect from a more traditional bank, though, including lending, checking accounts, investing, deposits, and credit cards, just to name a few.
The thing is, its online-only service is more than enough to draw an ever-bigger crowd. It boasted a little more than 8.1 million customers at the end of the first quarter, which is 44% more than it had at the same time a year earlier. Indeed, SoFi has added customers in every quarter going all the way back to early 2020, when it was only serving slightly more than 1 million members.
This is still just the beginning, however.
See, for as much as the world (and North America in particular) has embraced the idea of handling banking matters online or via an app, we’re at something of an inflection point. That is, today’s young adults have never known a world without the internet; most of them don’t even remember a world without smartphones. This crowd is completely comfortable with the idea of not having access to a physical bank branch. Indeed, a recent survey performed by the American Bankers Association indicates 74% of millennials prefer digital banking over in-person service, while 64% of Gen-Z says the same. This is in contrast with older consumers, most of whom will handle banking business online or with an app, but aren’t exactly in love with the idea of not having a brick-and-mortar branch to visit if the need arises.
It matters simply because millennials recently became the single biggest segment of the U.S. population, according to Pew Research, and they’re inching into their highest-earning wealth-building years. Don’t be surprised to see SoFi’s customer headcount growth rate accelerate from here.
PayPal Holdings
PayPal Holdings (NASDAQ: PYPL) isn’t just a fintech stock. It’s arguably the original fintech name, launching in 1998 to help then-nascent eBay get its online marketplace and e-commerce business going. For years it was the only dedicated payment-tech player.
Serious rivals eventually made their way into the market in the meantime, of course. Block‘s Cash App and Adyen come to mind as direct competitors, although alternatives like Amazon Pay and a handful of cryptocurrency wallets chipped away at PayPal’s share of the payment-intermediary market as well. The COVID-19 pandemic only put a brighter spotlight on these other payment options, as much of the world’s commerce was suddenly being handled online.
With all of this dust finally settling though, something curious is becoming clear. That is, PayPal is still the payment platform market leader, and it’s still growing. The company facilitates almost half of the world’s online purchases, yet still managed to increase last quarter’s total transactions to the tune of 11%, reaching 6.5 billion. That growth follows last year’s 12% increase in the amount of total payment volume PayPal handled.
How is the aging company holding up so well in such a competitive environment?
Much of this resilience can be chalked up to the fact that it was the first to market. The world is familiar with the brand and its offerings, and therefore comfortable sticking with PayPal even though alternatives are available — it’s easier to keep a customer than it is to win a new one over.
It’s also worth noting, however, PayPal arguably utilizes its whopping 200 petabytes’ worth of digital data better than any of its competitors, direct or indirect. That’s something Chief Executive Officer Alex Chriss intends to do even more aggressively now that artificial intelligence tools can make it even more useful.
The kicker: Newcomers will be stepping into PayPal stock while it’s priced at only 16 times its trailing per-share profits. For perspective, the S&P 500‘s current price-to-earnings ratio stands at a frothier 23 times its earnings.
Mastercard
Last but not least, add Mastercard (NYSE: MA) to your list of fintech stocks to buy for their superior performance potential between now and 2030.
No, it’s not a top-of-mind fintech name. That’s because it’s been so well defined over the course of the past few decades as a credit card processor. Don’t be fooled though. While it’s still first and foremost a card payment intermediary, it’s leveraging the power of technology to continue expanding its business.
Take its Labs-as-a-Service division as an example. This arm aims to “co-innovate with clients to deliver high-impact, customer-centric experiences, creating breakthrough products, platforms and services.” This unit co-created airline Emirates’s customer rewards program, for instance, while Mastercard’s so-called Test & Learn tech allows retailers to determine which products are most in-demand, and then stock stores accordingly. Mastercard was also one of the earlier names to embrace the idea of cryptocurrency-based digital wallets, even without knowing what crypto’s future looked like. These and plenty of other overlooked innovations are only made possible due to the advent of the right technologies, which Mastercard will gladly employ when there’s good reason to.
Bolstering its opportunity is how often cash is still being used to buy and sell goods and services. The U.S. Federal Reserve reports roughly 18% of all payments made within the U.S. are made with cash, while another 13% are direct bank transfers. These are transactions that would arguably be better handled with a modern debit or credit card.
On that note, Mastercard’s expected top-line growth of 11% this year is followed by next year’s projected growth of more than 12%. That’s measurably better than most other companies’ growth rates for the same time frame. It’s also a growth pace that will be sustainable for at least the next few years, as Mastercard continues to figure out how it can better leverage new technologies.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adyen, Amazon, Block, Mastercard, and PayPal. The Motley Fool recommends eBay and recommends the following options: long January 2025 $370 calls on Mastercard, short January 2025 $380 calls on Mastercard, short July 2024 $52.50 calls on eBay, and short June 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
Prediction: These Could Be the Best-Performing Fintech Stocks Through 2030 was originally published by The Motley Fool
