Fintech currently accounts for approximately 2% of global financial services revenue, but this is expected to rise to a 25% share by 2030, generating $1.5trn annually. Here is a collection of stocks poised to benefit from rising demand for fintech solutions and services.
- Block launches 10 generative AI features for Square retailers to drive sales.
- Jack Henry rolls out an anti-money laundering service as part of its cloud-native strategy.
- PayPal has filed a patent application for an NFT marketplace.
The Embedded Finance Stock
Global payments company Fiserv [FI] announced last week that it’s to begin offering embedded banking and payments solutions to digital merchants and platforms. Embedded finance, whereby financial services are integrated into non-financial offerings, “will allow software platforms and marketplaces to build deeper relationships between their brands and merchants, while significantly expanding the revenue potential,” Sunil Sachdev, Head of Embedded Finance at Fiserv, said in a press release.
The Positive Guidance Stock
Wise [WISE.L] raised its guidance in a second quarter (Q2) 2024 trading update released on 12 October. The payments specialist’s active user base grew 32% year-over-year to 7.2 million, while revenue and volumes rose 22% and 8% respectively. On the back of this strong performance, income growth for the full fiscal year is expected to be between 33–38%, up from an initial 28–33%. Q2 saw the company launch a new service in China, which expats can use to send money home.
The Generative AI Stock
Block [SQ] founder Jack Dorsey has returned to run the fintech company’s payment services arm Square, according to a regulatory filing dated 13 September. Dorsey started in his role as Square CEO — ‘Square Head’ is his official title — on 2 October. Last week, the company launched 10 new generative AI features that will be integrated into its software to enable retail sellers to automate operations, streamline workflows and save time. Saumil Mehta, Head of Point of Sale and Omnichannel at Square, said in a press release that the company is committed to providing “seamless” payment experiences.
The Cloud Strategy Stock
Payment processing company Jack Henry [JKHY] started rolling out Financial Crimes Defender, a cloud-native fraud and anti-money laundering solution, last week. Patrick Brennan, VP of Information Technology (IT) at Carver Federal Savings Bank, one of the first institutions to adopt the solution, said that the service “allows us to offer a secure and smooth banking experience for our customers”. Financial Crimes Defender is part of Jack Henry’s cloud-native, next-generation technology strategy, announced in early 2022.
The NFT Marketplace Stock
PayPal [PYPL] is taking steps towards establishing its own NFT marketplace, a patent application filed in March shows. The patent, which is still pending, poses a system that enables on- and off-blockchain transactions. The system would allow users to buy and sell NFTs through third-party service providers — though none have been specified. The company launched its own US dollar stablecoin PayPal USD on the Ethereum blockchain back in August.
Another Way to Invest in Fintech
The Global X Fintech ETF
The Global X Fintech ETF [FINX] holds all five stocks as of 20 October. As of 30 September, half (50.9%) of the portfolio has been allocated to IT, while 38.9% has been allocated to financials. Industrials, communication services and healthcare all have weightings of under 5%. The fund is down 7.1% in the past year and down 7.9% in the past six months.
The BlackRock Future Financial and Technology ETF [BPAY], which holds Block, Fiserv and PayPal, has allocated 89.8% of its portfolio to financials, while IT accounts for 3.1% as of 20 October — cash and derivatives has a 7% weighting. The fund is down 7.1% in the past year and down 1.8% in the past six months.