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3 Best Fintech Stocks for a Portfolio Boost

Rising interest rates and higher inflation means you’re looking for more opportunities to invest, maybe in niche markets. Why not consider fintech, short for “financial technology.” 

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If you’re still not sure what the word means, just remember that it’s fairly new. In fact, Interest in the word “fintech” itself didn’t even start to grow until 2015, according to Deloitte, even though fintech companies have “been around” for upwards of 20 years. However, many traditional financial services companies have ramped up to keep fintech in their sights.

Deloitte’s research shows that fintech startup growth grew from 2008 through 2010, but the number of companies entering the market doubled in the next couple of years afterward. However, the number of fintech companies shifted in 2015 and declined 62%, trending downward in 2017. (Learn more in Deloitte’s report about fintech development.)

Let’s go over the definition of fintech, just so we’re all on the same page, and also several fintech stocks you may want to add to try to get around the everyday news we’re all receiving about high inflation, rising interest rates and increasing global tensions. 

Why Buy Fintech Stocks?

At first, you might have a hard time pinning down an exact definition of fintech because it refers to many different types of technologies that integrate technology into financial businesses. In fact, it can get a little disorienting because many companies can crowd into the fintech nest, including companies that complete payment processing, online and mobile banking, online and peer-to-peer lending (P2P), person-to-person payments and financial software and services.

Fintech technically refers to integrating technology into the processing of money, digitization of money, digital financial services and easier access to credit. According to Fintech Magazine, embedded fintech will dominate the industry by 2030. This means that financial services will blend with other existing products. For example, Facebook Pay and Apple Card are two examples of blended technologies. The site also mentions several areas where fintech will continue to evolve: 

  • Fintech as a service
  • Hybrid cloud solutions
  • Increased merging of cybersecurity
  • Decentralized finance
  • Artificial intelligence (AI) financial assistants
  • Customer experience hyper performance
  • Invisible ID
  • Exponential computing power
  • Sustainability efforts

Fintech offers a never-ending plethora of opportunities, and it may be worth your while to take a look at various “arms” of fintech investing.

3 Fintech Companies to Keep Your Eye On

Ready to invest in fintech? Let’s see.

PayPal Holdings Inc. (NASDAQ: PYPL)

PayPal Holdings Inc., headquartered in San Jose, California, is a technology platform for digital payments for PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant products. The company links customers, including merchants and consumers, to payment transactions. Customers can use their accounts to purchase and pay for goods and transfer and withdraw funds. Consumers can also exchange funds with merchants using their bank accounts, PayPal account balances, PayPal Credit accounts, credit and debit cards or other stored value products. Consumers can access its offerings through the PayPal website or the mobile application, Venmo and Xoom. 

PayPal had solid reports for Q4 and year-end 2021, including the following:

In Q4, it had a total payment volume (TPV) of $339.5 billion, growing 23%, and net revenues of $6.9 billion, growing 13%. The company added 9.8 million net new active accounts, including 3.2 million from the acquisition of Paidy. Total payment volume hit $1.25 trillion, a growth of 33%. It had an operating cash flow of $6.3 billion and free cash flow of $5.4 billion.

In the financial year 2022, the company grew $1.5 trillion and surpassed $29 billion and total volume payment is expected to grow 19% to 22%. Revenue is expected to grow 15% to 17% and GAAP EPS should range between $2.97 and $3.15; non-GAAP EPS should range between $4.60 and $4.75 in 2022.

Green Dot Corporation (NYSE: GDOT)

Green Dot Corporation, headquartered in Texas, is a financial technology and bank holding company in the United States. The company offers the following segments and services: 

  • Consumer services
  • Business-to-business services
  • Money movement services
  • Deposit account programs
  • Network-branded reloadable prepaid debit cards
  • Network-branded gift cards
  • Secured credit cards
  • Money processing services
  • Cash transfer services
  • Simply paid disbursement services 
  • Tax processing, including tax refund transfers
  • Small business lending to independent tax preparation providers 
  • Fast cash advance

Green Dot markets its products under the Green Dot, GoBank, MoneyPak, TPG and other brands. Green Dot Corporation markets and sells its products and services through retail stores, mobile applications and various direct-to-consumer channels, such as online SEO, online displays, direct mail campaigns, mobile advertising and affiliate referral programs.

Total operating revenues on a generally accepted accounting principles (GAAP) basis were $330.8 million in Q4 2021, up from $284.3 million in Q4 2020, representing a year-over-year increase of 16%. GAAP net loss was $10.5 million for Q4, compared to a $24 million net loss for Q4 2020.

Non-GAAP total operating revenues were $321.2 million for Q4 2021, up from $274.5 million Q4 2020, a year-over-year increase of 17%. Adjusted EBITDA1 was $34.4 million, or 10.7% of non-GAAP total operating revenues for Q4 2021, compared to $34.8 million, or 12.7% of non-GAAP total operating revenues for Q4 2020.

Upstart Holdings Inc. (NASDAQ: UPST)

Upstart Holdings Inc., headquartered in San Mateo, California, is a cloud-based artificial intelligence (AI) lending platform that aggregates consumer demand for loans and connects to AI-enabled bank partners. Platforms for Upstart connect to consumers, banks and institutional investors through its AI lending platform. 

Total revenue was $305 million in Q4, a 252% massive uptick from Q4 2020. Fee revenue amounted to $287 million, an increase of 240% year-over-year. 

Upstart’s bank partners originated 495,205 loans, which totaled $4.1 billion, up 301% from last year. Income from operations was $60.4 million, up from $10.4 million the prior year, and GAAP net income was $58.9 million, up from $1 million in Q4 2020. Adjusted net income was $87 million, up from $5.4 million, and GAAP diluted earnings per share was $0.61.

Upstart’s total revenue in 2021 was $849 million, an increase of 264% from 2020, and total fee revenue was $801 million, an increase of 251% year-over-year. Bank partners originated 1.3 million loans totaling $11.8 billion, up 338% from the prior year. 

Consider Fintech Stocks for a Tech Boost

If you want a tech boost in your portfolio and don’t want to rely on straight technology, consider adding fintech. There’s no shortage of opportunities, and as you probably don’t need reminding, you want to get in at the ground level as much as you can. 

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