While early investors in the four FANG stocks (Facebook, Amazon, Netflix, and Google) are sitting pretty, the rest of us are busy looking for the next big thing. And while companies like the big four are leaning on the fairly recession-proof services of entertainment and instant-gratification goods, there’s no question that the next big wave is going to come from the financial technology sector.
These companies are finding new, creative ways to do more than just bank online or store and transfer money. They’re actually coming up with better ways to save, compare interest rates, and make money in the long run. Whether users are looking to invest money, set up trusts, or follow the twists and turns of the market, they’re using the best new fintech companies to do it. That’s where the current boom of financial apps and corporations comes in. Investing in these stocks could lead to a great ROI in only a few years. But, to make the most out of your investment, it’s important to have a nose for the right stocks. Here’s a breakdown to help you figure out which stocks you should watch, and which you’re better off avoiding.
To understand what makes a truly solid company, let’s start with the grandfather of them all: PayPal. When the company launched in 1998, it was something completely different than the Peter Thiel-owned and run banking service we know today. Initially called Confinity, the service was focused on providing better security to businesses making transactions online. Four years later, in 2002, the company had its first public offering after merging with one of Elon Musk’s early efforts and becoming PayPal. The service then spent a few years working strictly with eBay buyers to ensure secure payments.
Later on, it spread to thousands of different e-commerce sites, providing the kind of encrypted security that online purchases and money transfers so desperately needed at the time. Today, it’s the top online payment system worldwide, and is valued at $15.994 billion. So, how did it get there? And how can investors spot new companies and service destined for the same kind of meteoric rise?
What is Fintech?
Let’s start by breaking down what fintech is and why it’s so important to the global marketplace. While many investors are busy mining for Bitcoin to make a quick million, the best way to use financial technology to line your wallet is to keep an eye out for some of the companies that are making promising leaps when it comes to enhanced security, ease of transfer, and exclusive partnerships with banks or services. Think about Chime, the online banking service that makes it easy for users to transfer loose change into a separate savings account, or Acorns, the investment app that gives you $5 to start investing even if you have no idea where to start. These are concepts that don’t just use a friendly, easy-to-follow interface to introduce new users to the world of banking and long-term financial planning. Rather, they’re poaching an entirely untapped market: young-ish consumers who are high earners but don’t want to go to the trouble or expense of hiring a consultant to tell them how and where to invest.
However, it’s not just the companies catering to HENRYs (High Earners Not Rich Yet) that are making waves. While these apps are definitely onto something, the key is to catch new products and apps before they’ve broken through to the mainstream by identifying the kind of promising tech that’s poised to bring a company to the next level. Here are a few that are definitely worth keeping an eye on.
Ones to Watch
Founded in 2006, this Atlanta-based company specializes in facilitating direct lender-to-consumer loans online. This means that instead of having to visit a bank to get a loan for a healthcare payment, mortgage, or any other long-term lending contract, you can use the service to quickly get approved and move ahead with your plans. Currently valued at $4 billion, the company has found its niche by catering to middle-class consumers seeking elective surgeries, home improvements, and other services that require a low-risk loan from a bank.
It’s not just GreenSky’s tech that’s impressive. It’s the way the company has been able to partner with even the most conservative banks to produce an easy, intuitive way to facilitate loans to people with good or great credit. Because it’s making a typically obnoxious process so easy, it’s poised to keep expanding as the tech gets more advanced. This year alone, the company has brought in $425 million in revenue, a nearly $100 million increase from last year.
Broadridge Financial Solutions
Sometimes the best investment you can make is with a company that works with the stock market itself. Broadridge, a financial company that specializes in proxies and shareholder communications for investors in the stock market, is just that kind of company. In the same way that a company like GreenSky or PayPal facilitates quick, easy transactions that save users from having to show up at banks, Broadridge uses its tech to allow proxy votes to take place without a ton of paperwork changing hands.
Broadridge isn’t just an absurdly lucrative company, with a yearly revenue of about $2.4 billion. It’s one of the only companies that’s doing what it does, which makes it well-poised for a world takeover. Although the company has been around for a while, it doesn’t seem to be on the radar of even some of the shrewdest players of the market, which makes it a perfect low-risk investment for those trying to make a quick killing.
The best companies have an eye toward the future. They’re not just looking to make life and investments easier right now; they’re looking to actually change the way we think about and use money. Companies like GreenSky are at the very forefront of this movement, as is FinTech Group, a company that doesn’t just provide a single service to consumers, but makes it easier for global users to access the newest and most promising FinTech on the market.
With all the new financial technology circulating in the current marketplace, it’s not just difficult to pick a winner. It’s also difficult to figure out how these new technologies are proving themselves to be secure and trustworthy. Almost anyone can claim that they’re using cutting-edge technology to protect transactions and encrypted information. However, not everyone is looking out for the public good. Companies like FinTech Group source and protect new technologies to make it easier for consumers to build a trusting relationship with new, potentially disruptive tech. It’s a great tool and a helpful way to think about new technology. Not to mention the fact that the stock value couldn’t be more promising.
If you’re looking to invest in a company that’s on its way up but has outgrown all of the messiness associated with start-up culture, Fiserv is a safe bet. Like GreenSky, this promising company works closely with banks and lenders, and serves as a go-between to help banks and clients communicate. More specifically, Fiserv is behind a lot of the technology most of us use on a weekly basis on our favorite mobile banking app. With $5.7 billion in annual revenue, the company is well on its way to becoming a household name. Though Fiserv has technically been around since 1984, it has just started to break ground by making it easier for financial institutions to connect with users and keep them updated on important changes to policy. It also provides instant access to banking information, and the ability to freeze a card or cancel a fraudulent transaction on the spot.
If you’re someone who doesn’t like to take chances but wants to stay abreast of the latest developments in fintech, Fiserv is a company you should watch in the coming years. Not only has it already made significant progress in terms of online banking and app technology, but it’s poised to create waves when it comes to global banking. Imagine a world where moving between countries – and even continents – doesn’t affect the way you bank or use money. That’s the kind of future this company is looking to create, and it doesn’t show signs of slowing down.
Although GreenSky might be the top contender when it comes to personal loans, Chinese company Qudian is close behind, with a strategy for “micro-lending” that makes it easier for consumers to receive small loans of up to about $200. While this might not seem like a lucrative strategy, consider how many people could use this service in China alone. While the service works with money and commission on a small scale, it makes up for it by appealing to huge masses of people who have every incentive to pay back their loans on time. By creating a social lending platform, Qudian is creating a small loan empire overseas.
For workers who need something to tide them over until payday or simply want an easy alternative to a high-interest, high-APR credit card, Qudian proposes an incredibly attractive opportunity. Founded in 2014, Qudian is one of the newest companies to make waves in the fintech world. Although its stock value has had its ups and downs, Qudian has the potential to become huge in the next few years despite the risks.
Mizuho Financial Group
You can learn a lot about a company by studying its growth strategy. That is, if that strategy – and the company itself – is transparent enough to clue you in on how the business works. While many bank holding companies prefer to keep the details of how they function under wraps, the Japan-based holding company Mizuho Financial Group makes its aims and policies clear even to bystanders. By marketing itself to businesses that want to compete on a global level but perhaps don’t have the tools or capital to do so, Mizuho has carved out a spot for itself in the fast-paced world of global banking.
Businesses looking to grow by leaps and bounds first need to know one thing: Where can they find the most receptive audience? A company like Mizuho, in addition to making it easier for businesses to think globally, points out ways in which businesses can use current marketplace trends to get a head start on the competition.
It used to be that simply checking your credit score was enough to lower it. This created a big problem for business owners, individuals looking to rent or buy property, and people who simply wanted to peek in on their scores to see how they stood. Thanks to TransUnion, one of the oldest tech companies out there, consumers don’t run the risk of ruining their score just by checking it. They can also keep apprised of any changes in their score thanks to up-to-the-minute tracking technology. This makes it easier to dispute a change, become aware of fraud, and fight identity theft before it becomes a huge issue.
Although TransUnion was founded in 1968, it’s one of those few companies that have found a way to stay not just relevant but cutting-edge over the years. Once a standard credit monitoring company, TransUnion embraced technology early, understanding how linking with banks and finance at-a-glance apps like Mint and Cleo could provide users with deeper insights into their financial choices, not to mention tighter security protocols. This company’s star has been rising since the 60s and shows no sign of stopping or falling behind the times.
Most financial companies don’t have much time to focus on basic safety and security. That’s why they rely so heavily on technology to do the checking and double-checking for them. So many details of fintech rely on a thousand small but crucial ways of verifying identity and fighting against fraud. So why shouldn’t a service rise up to make identity checks and anti-money laundering protocol easier than ever? This is exactly what Kyckr has been doing since its founding in 2007 as a small Irish company. As a scion of know-your-customer tech, Kyckr is on its way to becoming one of those tools that no respectable bank can do without.
If there’s one kind of tech that’s only becoming more relevant with the years, it’s identity verification software. As our methods for ensuring that each banker’s identity is verified become more sophisticated, so do the hackers who try to cheat the system in the first place. We can no longer rely on basic, outdated tech to protect customers against massive data breaches and hacks. Investing in a company like Kyckr can only end up paying off in the long run.
Honorable Mentions: Intuit, Square, Acorns
It’s never easy to catch a stock on its way up. If you’re particularly risk-averse, however, there are some easy ways to invest in a small piece of something that’s already hit the ground running. If you’re keen on investing in something that’s here to stay, try grabbing a piece of Square technologies, the easy credit card payment app for independent vendors, Intuit, the money management umbrella service loved by millennials everywhere, and Acorns, an easy investment app that encourages young people to shop for stock portfolios and try their hand at saving and planning for the future. These companies, though already in the public eye, don’t show any signs of losing their touch in the next few years.
What Defines a Stock’s Worth?
While a stock’s value depends on a company’s market capitalization, there are other ways of predicting how a company will perform once it becomes publicly traded. The first way to assess whether or not a company’s stock is worth the risk is to take a serious, clear-headed look at what it’s offering and what type of audience might respond to it. For instance, while many older Americans might still prefer to interact directly with banks to get a larger loan, younger consumers don’t have the same hang-ups about tech and person-to-person lending via an app or website. In fact, most younger consumers leap at the chance to cut out the middleman and perform any financial action – from paying off a credit card bill to managing student loan payments – online. This means that, with the older generation becoming less and less of a deciding factor of what will succeed in the marketplace, a company like GreenSky is well placed to become an essential way of life for younger users between the ages of 25 and 50. While you can never be 100% certain which stocks will soar and which ones will plummet, you can usually consider companies like these – which combine promising tech, user-friendly interfaces, and the direct meeting of a growing consumer need – safe bets.