• April 18, 2024

Investors, Take Notice: The Fintech Bonanza Is Here To Stay

T.its week, less than three months after acquiring Visa for $ 5.3 billion (V.) was canceled At the behest of the U.S. Department of Justice over antitrust concerns, Fintech Plaid announced new funding of $ 425 million, tripling its pre-Covid valuation to $ 13.4 billion.

Plaid, an infrastructure provider that helps other financial services apps connect to consumer bank accounts, is a kind of blowout for the fintech industry as a whole. But you don’t have to break Plaid’s growth to see the industry in tears.

Last month, online payment provider Stripe raised $ 600 million on a staggering $ 95 billion valuation – nearly triple that Valuation of $ 36 billion from less than a year ago in April 2020.

Affirm, a leader in the burgeoning buy-now-pay-later sector, went public in January and quickly hit one $ 24 billion Rating. The sector, which offers consumers an alternative to credit card spending, grew 215 percent year over year in the first two months of 2021 Adobe report.

Square, the payments giant and head of Twitter founder Jack Dorsey, was also enjoying himself. recording Earnings growth of 52% year over year and net sales growth of 141% in the fourth quarter of 2020. Square’s stock is up over 300% since April 2020.

The list goes on and on: Robinhood’s secondary stock trading app at a Valuation of $ 40 billion;; Crypto Goliath Coinbase is preparing for a rumor $ 100 billion initial public offering;; like smaller fintechs ramp Reach unicorn status after only a few years of operation; and so on.

And while the lightning-fast growth of private fintechs is particularly noticeable, the various publicly traded fintechs – those that provide the core infrastructure and don’t hit the headlines every two weeks – are also outperforming the broader market. The Global X FinTech ETF (FINX), which gathers dozens of companies it describes as “at the forefront of emerging financial technology,” is up 84% year over year.

Perhaps the most compelling case for fintech, however, is that non-financial service companies are trying to develop their own fintech products and services. Just this week the journal reported this grocery delivery service Instacart and food delivery company DoorDash (LINE) plan to create their own credit cards that will sync with their online applications.

Elsewhere, retail giant Walmart (WMT) has filed a patent application with the US Patent and Trademark Office for hazel, the in-house fintech company. Filing suggests that Hazel may offer a wide range of financial services, including bank transfers, mobile payments, credit and debit card transaction processing, lending and lending, and even cryptocurrency transaction processing.

Of course, Walmart is hardly the first retailer to get into fintech. One of the more successful examples is MercadoLibre (MELI), the dominant e-commerce provider in Latin America whose MercadoPago fintech platform is growing in popularity. What began as an easy way for merchants to make money on the MercadoLibre platform has since grown into a range of financial services, including payment processing for off-platform transactions, mobile point-of-sale hardware for small businesses, and investment and portfolio management services.

“MercadoLibre started out as Ebay in Latin America, but they learned from Amazon, they learned from Alibaba. They also learned from PayPal and Ant Financial, ”says Kunal Madhukar, senior analyst at Deutsche Bank who deals with Internet and e-commerce companies. “You’re basically learning from all of these different companies in different parts of the world what works, what has worked in different countries, and how this can be adapted to Latin America.”

Indeed, MercadoLibre’s ability to learn from and emulate financial innovators like PayPal and Ant Financial was a winner. The company’s fintech business generated Net sales of $ 1.4 billion versus just $ 600 million in 2018.

Such riches are difficult to reproduce for most companies, but MercadoLibre’s fintech success continues to be an important lesson for cross-industry US companies: Control over financial services offerings can lead to new innovations, neighboring companies, and improved customer relationships.

Because of this, investors looking to capitalize on the fintech boom can look beyond financial services. Fintech is increasingly everywhere.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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