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4 FinTech Stocks to Buy on Changing Consumer Preference

Manaswita Ghosh Dutta

The rise in financial technology (FinTech) is changing the way consumers use financial services. Increased dependency on smartphones, tablets and other connected devices is spurring demand for mobility in the financial services sector. This demand is not only driving the way consumers interact with money but also the way financial companies operate.

Therefore, investors keen on FinTech companies can invest in stocks gaining from high demand.

Changing Payment Preferences Driving FinTech

FinTech’s largest contribution to America’s booming millennial population is the flexibility it offers for payments. Mobility largely defines this flexibility, which is precisely what drives consumer preference toward digital payment systems.

At present, 83.1 million millennials comprise the U.S. population, which makes them the largest generation in America’s history, a Forbes report cited. Therefore, it’s no surprise that millennial payment preferences should play a vital role in the growing usage of digital payment systems.

A Visa report in 2018 cites that not only do millennials use cards more than other segments, but also are likely to increase spending as they grow older. They are also welcoming to new and emerging payment products. This rising preference for debit/credit cards among the largest constituents of America’s current workforce is a crucial factor driving the payment industry today.

Michael Marx, senior director at Visa, Inc., noted that consumers are using card-based payments and electronic funds transfer instead of paper checks, depending on different merchants’ payment acceptance practices.

Businesses have begun to adapt themselves to meet consumer preference for digital payment systems. This is why many retailers and restaurants are now eliminating cash payments. The process not only helps diminish long queues and increase the number of transactions on a per hour basis but also saves companies’ money on transportation of cash.

It is this rising trend for digital financial payment and services that has drawn the attention of established financial services giants. These companies are entering into M&As with FinTech companies to increase the perimeter of their financial services.

FinTech M&As Boost Operational Efficiency

Mergers and acquisitions raise the scope of business and services for financial services organizations and Fintech companies as well as increase their asset valuations.

Well-established financial companies can also boost their operational efficiency through these collaborations. Improved security protocols, biometrics, new technologies such as AI, machine learning and blockchain in financial services, all of which are offered by FinTech companies are vital in enhancing operational efficiency. Data handling and management can also be advanced through FinTech. This makes digital transformation faster.

In fact, the steep rise in M&As in the financial services sector this year is indicative of companies’ growing acknowledgement of demand for digital financial services. These businesses are fast realizing that consolidation rather than competition with FinTech companies raise the scope of their business and services.

Earlier in January, Fiserv Inc. FIS, the financial services technology company whose services are the base for most common banking transactions, announced a merger worth $22 billion with First Data Corporation FDC. First Data’s Clover, which is a point-of-sale (POS) platform, has more than a million merchant devices used across the globe. Undoubtedly, the deal adds more value to this POS technology that competes with Square SQ.

This deal marked the beginning of several other M&As among other FinTech companies. Fidelity National Information Services announced in March plans of buying payment processing company Worldpay for about $35 billion. Payment technology companies Global Payments Inc. GPN and Total System Services, Inc. TSS have also agreed on a stock merger of equals, CNBC reported earlier this week.

4 Stocks to Buy

We have picked four FinTech stocks that you could consider adding to your portfolio. These stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

LexinFintech Holdings Ltd. LX operates as an online consumer finance platform. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen 3.7% over the past 30 days. The company’s stock price has outperformed the Zacks Financial – Consumer Loans Market on a year-to-date basis (+69.4% vs +25.8%).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Global Payments Inc. is a payment technology and software solutions provider for card, electronic, check and digital-based payments. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 1.2% over the past 30 days. The company’s stock price has outperformed the Zacks Financial Transaction Services Market on a year-to-date basis (+44.3% vs +28.3%).

Intuit Inc. INTU is a provider of financial management and compliance products and services. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 0.4% over the past 30 days. The company’s stock price has outperformed the Zacks Computer – Software Market on a year-to-date basis (+29.9% vs +23.2%).

PayPal Holdings, Inc. PYPL is a technology platform and digital payments company. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 4.2% over the past 60 days. The company’s stock price has outperformed the Zacks Internet – Software Market on a year-to-date basis (+32.9% vs +27.5%).

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PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
Square, Inc. (SQ) : Free Stock Analysis Report
 
Intuit Inc. (INTU) : Free Stock Analysis Report
 
Total System Services, Inc. (TSS) : Free Stock Analysis Report
 
Global Payments Inc. (GPN) : Free Stock Analysis Report
 
Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report
 
LexinFintech Holdings Ltd. Sponsored ADR (LX) : Free Stock Analysis Report
 
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