Top 10 Promising Fintech Companies To Invest In

Are fintech stocks still worth buying?

Right now, fintech investing appears to be a promising opportunity. Forecasts indicate a substantial 33.6% revenue growth in the digital assets market by 2024, reflecting the sector's robust potential. The digital payments landscape is witnessing a significant surge, with a projected user base of 5.48 billion by 2027, underscoring the widespread adoption of digital financial transactions. The ongoing shift toward online and mobile banking, coupled with the rise of artificial intelligence, further amplifies the sector's growth potential.

These compelling statistics not only highlight the current strength of the fintech sector but also suggest a favorable outlook for investors seeking both short-term gains and long-term gains.

Top undervalued fintech companies to invest in

The financial tech stocks list below provides a snapshot of the top 10 undervalued financial tech stocks:

1 Block Inc (NYSE: SQ)

Headquartered in San Francisco, Block Inc., formerly known as Square Inc., stands as a prominent fintech stock. Co-founded by Jack Dorsey, the company has made significant strides in providing diverse financial tools and services, primarily targeting small businesses and individuals.

Block gained recognition for its innovative point-of-sale system, allowing businesses to seamlessly accept card payments via mobile devices or dedicated hardware. In addition, the company's renowned Cash App, a peer-to-peer payment application, has further solidified its position in the fintech sphere.

Investors responded positively to Block's fintech offerings, evident in the remarkable 248% surge in the company's share price throughout 2021. However, this was followed by a gradual decline fueled by fierce competition from Paypal and other payment solutions. Nonetheless, Block continues to demonstrate resilience and adaptability. The recent acquisition of Hifi, a music-focused fintech startup, adds an intriguing layer to its portfolio, showcasing a commitment to diversification and innovation.

2 Visa (NYSE: V)

Visa, a global financial giant, stands at the forefront of electronic funds transfers, facilitating transactions worldwide through its widely used credit, debit, and prepaid cards. Notably, Visa has embraced blockchain technology, specifically Ethereum, in partnership with Anchorage, a digital asset bank. This move aims to enhance transaction speed and transparency, positioning Visa as a key player and one of the top payments stocks today.

The company's performance is closely linked to consumer spending trends, and recent indicators are positive, with notable increases in payment volumes and key transaction measures.

Visa's stock has shown remarkable resilience, maintaining a consistent upward trend for over a decade, making it an enduringly attractive choice for investors. The recent financial report for Q3 2023 reveals a substantial net revenue of $8.1 billion. This impressive figure not only solidifies Visa's financial strength but also underscores its strategic adaptability in navigating the ever-evolving landscape of the financial technology sector.

3 Paypal Holdings (NASDAQ: PYPL)

Boasting over 360 million active users, PayPal has established itself as a dominant force in the industry. The company’s influence extends beyond its vast user base, with its person-to-person payment platform, Venmo, driving remarkable growth. Venmo has become synonymous with seamless, social payments, further solidifying PayPal's position as a leader in the financial technology landscape.

The strategic acquisitions of businesses like Honey, an e-commerce tool, showcase PayPal's commitment to providing a holistic financial experience for its users. These moves not only diversify its offerings but also contribute to the company's adaptability in meeting evolving consumer needs.

In Q3 2023, PayPal reported an astounding $7.4 billion in revenue, despite the fierce competition from Stripe and Payoneer.

4 SoFi Technologies (NASDAQ: SOFI)

SoFi Technologies is a leading online loan and investment platform specializing in student loan refinancing, personal loans, mortgages, home loans, and investment services. Operating as a digital-first financial institution, SoFi aligns seamlessly with the preferences of tech-savvy consumers, providing online and mobile banking solutions.

Beyond lending, SoFi distinguishes itself by offering a broad spectrum of investment services, including stock and ETF trading, robo-advisors for automated investing, and retirement accounts. This inclusive approach positions SoFi as a convenient one-stop-shop for fintech innovation.

With revenue surpassing $500 million in Q3 2023 (up 27% from Q3 2022), SoFi's financial performance underscores its market strength and potential for further expansion.

5 Intuit Inc (NASDAQ: INTU)

Intuit Inc., a notable player in the financial technology sector, has demonstrated a noteworthy performance as a fintech stock. Notably, in Q3 2023, the company reported substantial revenue, reaching $6 billion. This financial achievement underscores Intuit's position as a significant player in the industry.

One of the key strategic moves during this period was Intuit's acquisition of Credit Karma. This acquisition broadens Intuit's reach and services, expanding its footprint in the personal finance space. The move aligns with industry trends of companies diversifying their offerings to provide a more comprehensive suite of financial tools to users. Overall, INTU stock has maintained a strong uptrend in the past decade, making it a stock to keep an eye on in the coming months.

6 Coinbase Global (NASDAQ: COIN)

Coinbase Global, a prominent player in the cryptocurrency industry, has garnered attention as a key fintech stock. The company, operating one of the largest cryptocurrency exchanges globally, has played a pivotal role in bringing digital currencies to the mainstream.

Coinbase's performance is closely tied to the volatility of the cryptocurrency market, and as such, its financial results can be subject to market fluctuations. The company's revenue streams primarily come from transaction fees, making it susceptible to shifts in trading volumes and crypto prices. In its recent financials, Coinbase reported a total revenue of $674.1 million for Q3 2023, surpassing analyst estimates of $650.9 million.

7 MercadoLibre Inc (NASDAQ: MELI)

MercadoLibre, a prominent name in the fintech and e-commerce sector, warrants attention for its substantial presence and ongoing growth. The company boasts a massive e-commerce business, registering well over $30 billion in annualized merchandise sales volume, a testament to its significant market share and the trust it commands among users. This e-commerce giant has been expanding at an impressive pace, reflecting the robust demand for its platform and services.

In addition to its e-commerce stronghold, MercadoLibre has successfully diversified its offerings. The logistics platform, Mercado Envios, plays a pivotal role in ensuring efficient and reliable product deliveries, contributing to the overall customer experience.

Furthermore, Mercado Credito, the company's lending business, has gained notable traction in recent years. This diversification positions MercadoLibre as more than just an e-commerce platform; it becomes a comprehensive ecosystem with logistics and financial services integrated seamlessly.

8 Fiserv Inc (NYSE: FI)

Fiserv Inc., a global payments company, has demonstrated resilience and adaptability over the years with its stock recording a commendable 57% uptick in the last five years. In Q3 2023, the company reported Total company adjusted revenue of $4.6 billion, marking an 8% growth despite facing currency headwinds.

In a strategic move to enhance its capabilities, Fiserv has seamlessly integrated with Eltropy, a digital conversations platform designed for community financial institutions (CFIs). This collaboration is particularly empowering for credit unions that utilize Fiserv's full-service account processing platform, Portico. Through this partnership, credit unions can seamlessly access Eltropy's advanced technology, which includes Text, Video, Secure Chat, co-browsing, screen sharing, and chatbot features—all consolidated within a unified platform.

This strategic integration showcases Fiserv's commitment to offering comprehensive solutions and staying ahead in the evolving landscape of financial technology.

9 Shift4 Payments Inc (NYSE: FOUR)

Shift4 Payments is renowned as a leader in secure payment processing solutions, offering a comprehensive suite of services that includes point-to-point encryption, tokenization, EMV technology, and point-of-sale (POS) systems. This commitment to security aligns with the increasing demand for robust measures in the ever-evolving landscape of digital transactions.

In the third quarter, Shift4 Payments demonstrated robust financial performance, with gross revenue experiencing a notable 23% growth, reaching an impressive $675 million. Moreover, gross revenue less network fees also saw a substantial 24% year-over-year growth, totaling $243 million. These financial indicators are consistent with the company's expectations, highlighting its ability to navigate the complexities of the payment processing industry and maintain a trajectory of steady growth.

10 DraftKings Inc (NASDAQ: DKNG)

DraftKings Inc. is a well-known American sports betting and daily fantasy sports company. It's a digital sports entertainment and gaming company that offers online sports betting, daily fantasy sports, and iGaming. DraftKings has become a major player in the sports betting industry, providing a platform for users to engage in legal sports betting activities in regions where it is permitted.

The company went public in April 2020 through a merger with a special purpose acquisition company (SPAC). Since then, DraftKings has continued to expand its presence in the rapidly growing online sports betting market in the United States and other regions where sports betting is legalized.

DraftKings Inc. has marked a significant financial stride, with its revenue for the third quarter soaring by 57% to reach $790 million. This impressive growth has been attributed to the company's strategic expansion into new jurisdictions, a move that not only widened its market reach but also fueled a notable influx of new customers.

How to choose the right fintech stocks

If you’re not sure how to find the best Fintech stocks for your portfolio, here are 5 things to keep in mind while researching;

1. Revenue Growth and Profitability

When evaluating fintech stocks, delve into their revenue growth patterns over the past few years. Look for a consistent and substantial increase, and don't forget to check if this growth translates into profitability. Metrics such as revenue CAGR (Compound Annual Growth Rate) and net profit margins provide concrete insights into a company's financial health.

2. Market Potential and Positioning

To make an informed choice, assess the market potential of the fintech sector they operate in. Look into reports and projections to understand the industry's growth trajectory. Try to choose stocks in sectors with high demand, and check the company's competitive positioning.

3. Regulatory Compliance

Before making any investments, ensure the fintech companies comply with regulatory standards. You can look into their licensing and adherence to industry regulations to mitigate regulatory risks. A solid regulatory framework is vital for the stability and longevity of a fintech investment.

4. Innovation and Technology

To stay ahead, look into fintech companies that invest in cutting-edge technologies. Assess if they're incorporating AI, blockchain, or cybersecurity solutions. A strong technological foundation ensures a fintech's resilience and competitiveness in a rapidly evolving market.

5. Partnerships and Collaborations

To gauge a fintech's credibility and growth potential, check out their strategic partnerships. Strong collaborations with established financial institutions can open doors for market expansion. Finally, evaluate the impact of these partnerships on the company's growth trajectory and overall standing in the industry.

How to create your fintech oriented portfolio?

Let's dive into all you need to construct a robust fintech-oriented investment portfolio.

1. In-Depth Research

Embarking on your journey to build a robust fintech-oriented investment portfolio begins with thorough research into individual companies. To achieve this, leverage various sources of information such as reputable news sites, financial publications, and official company reports. News sites like Bloomberg, CNBC, and financial sections of major newspapers provide real-time updates on market trends, mergers, and regulatory changes

2. Diversify Strategically

You can construct a resilient portfolio by strategically diversifying across various fintech sub-sectors, reducing risk exposure to single companies. While diversifying across different companies, it's best to consider the fintech categories they fall into. You can allocate portions of your portfolio to various areas, including payments processing platforms, trading and investment companies, insurance and more. This diversification strategy ensures that the overall performance of your portfolio is not overly reliant on the success or failure of a specific segment.

3. Explore Sectoral ETFs

Next, you may want to consider the simplicity and diversification benefits of Sectoral Exchange-Traded Funds (ETFs) focused on fintech, providing broad exposure to the sector. ETFs allow you to invest in a basket of fintech stocks, offering a convenient and diversified investment option.

4. Evaluate Fintech Indices

Assess the performance benchmarks provided by fintech indices, such as the Solactive FinTech Index or the ISE Mobile Payments Index, for a comprehensive view of the sector. These indices serve as benchmarks for your portfolio, helping you gauge its performance relative to the broader fintech market.

5. Stay Ahead with Global Trends

To make informed decisions, you need to keep yourself abreast of evolving global fintech trends, as staying informed about emerging technologies and regulatory shifts is crucial for making informed investment decisions. This ongoing awareness allows you to position your portfolio strategically in response to market dynamics.

6. Regular Portfolio Audit

Ensure the continued relevance and alignment of your fintech portfolio by regularly reviewing and adjusting based on market dynamics, company performance, and your financial objectives. Regular oversight enables you to adapt your investment strategy to changing conditions and maintain a portfolio that reflects your current financial goals.

Potential benefits of investing in fintech and payment stocks

1. Innovation and Growth Potential

Fintech companies are often at the forefront of technological innovation, presenting substantial growth opportunities. Investments in these stocks can provide exposure to cutting-edge solutions in payment processing, digital banking, and other financial services.

2. Market Expansion and Disruption

Generally, Fintech companies have the potential to disrupt traditional financial services, leading to market expansion. As these companies introduce novel solutions, there's room for capturing new customer segments and increasing market share, creating favorable conditions for investors.

3. Efficiency and Cost Reduction

Fintech solutions aim to enhance efficiency and reduce costs in financial transactions. Companies that successfully implement these technologies can experience improved operational efficiency, potentially leading to increased profitability and shareholder value.

4. Global Trends and Adoption

Fintech operates in a global context, and as digital financial services gain widespread acceptance, investments in fintech and payment stocks can benefit from the increasing adoption of these technologies on a global scale.

Potential risks of investing in fintech and payment stocks

1. Regulatory Challenges

The fintech sector is subject to evolving and sometimes uncertain regulatory environments. Changes in regulations, especially those related to data privacy and financial oversight, can pose challenges and impact the operations of fintech companies.

2. Cybersecurity Threats

Fintech companies handle sensitive financial data, making them attractive targets for cyberattacks. The risk of data breaches and cybersecurity threats can lead to reputational damage, financial losses, and regulatory consequences.

3. Market Volatility and Valuation Concerns

Fintech stocks, particularly those of startups, may experience higher volatility due to market perceptions, competition, and rapid technological changes. Valuation concerns, especially for companies with high growth expectations, can lead to market corrections which, in turn, affect the value of your stock investments.

4. Competition and Industry Consolidation

The fintech sector is highly competitive, with new entrants frequently challenging existing players. Increased competition and industry consolidation can impact market share and profitability, posing risks for investors who may need to carefully monitor industry dynamics.