Everyone seems to be excited about Ant Financial’s IPO but the interest in Fintech goes beyond Ant itself. Some of the hottest Fintech companies remained private – Robinhood, Betterment and Stripe, and it is not possible for retail investors to get a stake.
That said, there are many Fintech companies that are listed. I highlight 7 companies herein.
Ant Financial (SEHK:6688)
Ant is definitely the hottest and biggest Fintech at the moment. Its IPO is oversubscribed by 872 times and it is currently the biggest listing ever in history, raising US$34.4 billion (the last record was held by Aramco which raised US$26 billion).
Ant’s revenue has grown at 36% per year between 2017 to 2019. It is profitable with a ¥18 billion (US$2.7 billion) net profit or a 15% net profit margin in 2019.
Ant provides a full suite of financial services – payments, insurance, investments and credit.
Below is a breakdown of the segment revenue for Ant in 2019:
I had dedicated a full article to Ant Financial previously, in which I described each of their business segment.
Tencent (SEHK:0700)
One cannot talk about Ant Financial / Alibaba without mentioning Tencent. Their arch rival has been a big Fintech player too – for example, WeChat Pay is as ubiquitous as Alipay in China.
In 2019, Tencent derived ¥101 billion revenue from its Fintech segment. This is just slightly lower than Ant’s ¥120 billion revenue. Hence, Tencent is a force to be reckoned with when it comes to Fintech even though Ant Financial IPO has gathered a lot of fanfare and eclipsed Tencent.
I believe that it is possible for Tencent to spin off the Fintech arm in an IPO in the future.
Lufax (NYSE:LU)
Following the interest of Ant Financial IPO, Lufax has also hopped on onto the gravy train and was listed on NYSE (started trading on 30 Oct 2020) with a US$33 billion valuation.
Unfortunately, it couldn’t steal the thunder from Ant Financial as Lufax share price opened 14% lower (it could also be because there was a broader market sell off on the day of listing).
It is not the most surprising thing since Lufax is a smaller player in Fintech – Lufax’s 2019 revenue was ¥48 billion, which was less than half of Ant’s ¥120 billion revenue.
Moreover, Lufax mainly focused on peer-to-peer lending and wealth management instead of offering a comprehensive financial solutions to the customers.
Square (NYSE:SQ)
Square has gained 1,105% since its IPO in 2015. Definitely one of the hottest fintech in US.
Co-founded by Jack Dorsey (CEO of both Twitter and Square), Square enables merchants to collect point-of-sale credit card payments.
Small and medium enterprises may not find it economical to loan a credit card machine and accompanying facilities from the banks and hence many do not accept credit cards. Square saw an opportunity and introduce a audio jack device that can be conveniently plugged into a smartphone to receive credit card payments – a simple and cheap solution!
Of course Square has evolved since, and now offers better looking payment devices with more sophisticated services. It has also extended its service to online stores and not just physical retailers.
PayPal (NASDAQ:PYPL)
The trophy for the first online payment gateway to be made popular, has got to be PayPal. Even with increasing competition (such as Stripe), good old PayPal is still a fintech force to be reckoned with.
The share price was up more than 4 times in the past 5 years.
On 21 Oct 2020, PayPal announced that customers would soon be able to buy, hold and sell cryptocurrency directly from their PayPal accounts. I see this as a big step in acknowledging cryptocurrency and that PayPal still wants to break new ground to stay relevant.
MarketAxess (NASDAQ:MKTX)
MarketAxess is less well-known to most since it mainly serves the institutions and offers no B2C products.
It is one of the largest fixed income data and trading platforms in the world. Unlike the stock market, bonds are traded over-the-counter (OTC) and price quotes can have a large variance among banks. MarketAxess created a platform to provide better price transparency and trading liquidity for these fixed income products.
The share price has done superbly well and is up more than 4 times in the past 5 years!
iFAST (SGX:AIY)
iFAST is probably the hottest SGX-listed fintech company.
Its share price has surged 258% in 2020 on a good set of financial results.
iFAST serves other financial companies (B2B) as well as individual consumers (B2C). It offers a wide range of financial services, from advisory to brokerage.
It has also led a consortium (with Hande and Yillion) to bid for the Digital Wholesale Bank license and it is still in the running.
Find out more about iFAST in this article.
Fintech is hot right now, might be better to wait for better prices
Fintech stocks are hot right now, probably led by the IPO of Ant Financial as well as the digital banking licenses awarded by Monetary Authority of Singapore.
I know it is easy to get excited about hot stocks in the market and FOMO is a tough emotion to fight against, after all nobody wants to miss out on the action. But I think its more sensible to wait for price pullbacks to buy those stocks that you are interested in. Otherwise, adopting a dollar cost averaging approach may not be a bad idea too.
I believe Fintech has the potential to make real progressive changes to our world but I also think that the current prices are pricing in the high expectations too.
