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4 Stocks to Gain Traction From Fintech Evolution in 2021

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Zacks Equity Research
·6 min read
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Financial technology (fintech) companies can be counted among the most exciting growth opportunities in the market. In the past few years, fintech stocks have exploded in terms of growth with evolution in new digital payment-processing solutions, increased usage of smartphones for online banking and the emergence of cryptocurrencies. Several established financial institutions are bumping up investments in Fintech to replace or enhance the usage of these financial services.

The coronavirus pandemic further accelerated cashless payments as consumers relied more on online payments and other non-cash payment methods to avoid contracting the infection. Certain behavioral changes induced by the pandemic like online shopping, cashless payments and no-contact deliveries are here to stay and will continue to boost the Fintech space in 2021 and the years to come.

Fintech Space to Flourish Worldwide

Fintech companies are constantly developing and innovating various ways for hassle-free financial services in the time new normal. Increased funding in start-ups is a major propeller for the fintech market’s global growth. Majority of these Fintech players’ primary service is digital payments with significant involvement in digital commerce. According to a Statista forecast, total transaction value in digital payments is expected grow at 23.7% to reach $4.93 trillion and the number of digital users is estimated to increase 10.1% year over year to 3.47 billion in 2020.

Per a Technology Decisions article, Statista projects digital commerce to witness an 8.9% CAGR to reach $4.11 trillion in 2024, on average. The transaction value per user in digital commerce is envisioned to hit $843 in 2020. However, China is expected to lead in digital payments and digital commerce, globally. The country is expected to have generated $2.31 trillion in digital payments last year. On Jan 5, management at the fintech company Neat announced that it became a member of the Visa network and will issue its own Neat Visa card for businesses incorporated in Hong Kong. This association with Visa will help Neat issue its own payment products and also utilize Visa’s expanded global network and an enhanced customer experience.

Further, fintech companies are trying to establish themselves in the developing nations like Pakistan. Recently, a leading digital payment and banking technology provider i2c Inc. announced that it was selected to power TAG, Pakistan’s first digital-native financial super app. The app is due for launch in the first quarter this year and aims to provide instant payments to Pakistan’s unbanked adult population. The application will have features through which anyone with a TAG account can send and receive money instantly without any fees, access ATM, make online bill payments, recharge mobiles and monitor spending. Tag also plans to expand to the Middle East and North Africa.

Fintech IPO in Line

On Jan 5, Affirm, a fintech startup that provides installment loans to online shoppers, announced that it is seeking to raise $9.4 billion in an IPO. The IPO filing of the company founded by PayPal’s co-founder Max Levchin underscores that last year’s record-listings run will be carried over in 2021.More than 6,500 merchants use Affirm’s platform at present. After adding products to the e-carts, shoppers can choose or schedule a payment date at an annual interest rate ranging between 0% and 30%.

Funding helps the companies put more money on research and development, and expand their services. IPOs and funding point toward the health of the fintech sector and its strong prospects. Another Fintech company Cred, a credit card payment and management platform, raised $81 million as part of its Series C funding round on Jan 5. This funding round puts the company at a post-money valuation of $806 million. The company claims to processes nearly 20% of all credit card bill payments in India.

4 Stocks to Watch

The global fintech market was valued at $5504.13 billion in 2019 and is expected to see a CAGR of 23.58% through 2025, going by TechSci Research report. The key factors boosting the fintech market’s growth is high investment in technology-based solutions by banks and other financial institutions. Additionally, the infrastructure-based technology and APIs are reshaping the future of the fintech. AI interfaces and chatbots incorporated in fintech applications redefined customer services and will help the fintech market grow at an impressive rate in 2021 as well. Given such a solid potential, we shortlisted four companies that are poised to grow.

Synchrony Financial SYF delivers a range of specialized financing programs and consumer banking products to digital, retail, home, auto, travel, health and pet industries. The company’s expected earnings growth rate for the current year is 70.3% compared with the Zacks Financial - Miscellaneous Services industry’s projected earnings growth of 7.4%.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised 9.2% upward over the past 60 days. Synchrony Financial currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Usio, Inc. USIO provides integrated electronic payment processing services to merchants and businesses. The company’s expected earnings growth rate for the current year is 25% compared with the Zacks Financial Transaction Services industry’s average of 21%. The Zacks Consensus Estimate for this presently Zacks Rank #2 (Buy) company’s current-year earnings has been revised 19.2% upward over the past 60 days.

American Express Company AXP provides credit, payment card products, and travel-related services. The company’s expected earnings growth rate for 2021 is more than 100% compared with the Zacks Financial - Miscellaneous Services industry’s projected earnings growth of 7.4%.

The Zacks Consensus Estimate for the company’s current-year earnings has been revised nearly 2% upward over the past 60 days. American Express currently carries a Zacks Rank #3(Hold).

PayPal Holdings, Inc. PYPL operates as a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants. The company’s expected earnings growth rate for the current year is 18.7% compared with the Zacks Internet - Software industry’s projected earnings growth of 10.8%. The Zacks Consensus Estimate for this presently Zacks #3Rankedcompany’s current-year earnings has moved 0.2% north over the past 60 days.

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American Express Company (AXP) : Free Stock Analysis Report
 
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