Investing in Fintech Stocks
Fintech might not be a word you’re completely familiar with, but the likelihood is that it plays a part in your daily life. So, what are the best fintech companies to invest in in 2024? In this article, we will highlight 2 top fintech stocks and 1 fintech company to potentially watch in the future.
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What Are Fintech Companies?
Fintech, short for financial technology, is a term that refers to technology which is exploited to make various financial processes more efficient, disrupting traditional financial services in the process.
Probably the most prevalent example of fintech in our daily lives is the evolution of online and app-based banking and payments. Not only have high street banks embraced this technology, but many “challenger” banks have emerged, capitalising on a historical lack of innovation from traditional banking services.
Indeed, this is a familiar story across the world of financial services. For years, significant barriers to entry, including strict regulation and high startup costs, meant that the sector was somewhat of a closed shop. Inevitably, a lack of competition across the industry led to a lack of innovation.
Consequently, major advances in technology and a shifting regulatory landscape made the sector ripe to be shaken up by new, exciting fintech companies. We’ve already mentioned banking and payments, but similar things have happened in lending, insurance and brokerage services.
The Best Fintech Stocks to Watch
The term fintech stock covers a wide variety of companies, ranging from more established names, such as PayPal, to a constant stream of new comers attempting to democratise the financial services industry. In the following sections, we’ll take a look at a couple of the best fintech stocks to watch.
Block
Fintech company Block Inc., formerly Square, began life as a payment solution for smaller merchants, allowing them to accept credit and debit cards using a smart phone or tablet.
This legacy business, still known as Square, has evolved into a wider ecosystem for merchants, enabling them to accept online payments, providing payroll services, offering financing and a variety of other services.
Besides Square, Block is also well-known for its personal finance application, Cash App. Cash App provides customers with banking and payment transfer services as well as the ability to buy, sell and transfer stocks and bitcoin. In this way, Block has created two financial ecosystems catering to both businesses and consumers.
MercadoLibre
As well as being a leader in e-commerce in Latin America, MercadoLibre has a lending operation – Mercado Credito – and a payment processing segment – Mercado Pago. With these two operations, the fintech stock has sought to capitalise on the limited access consumers have to financial services in the region.
In particular, the rapid growth of Mercado Pago has been a key revenue driver for the fintech company. This payment processing arm was initially created as a way to allow unbanked customers to purchase products through the company’s e-commerce platform.
However, it has since evolved far beyond that, becoming widely adopted outside MercadoLibre’s marketplace. Its low-cost QR code transactions facilitate digital payments without needing a bank account, and also allows merchants without card infrastructure to accept non-cash payments.
This is a particularly important and practical service in a region where most remain unbanked and a high proportion of the population work in the informal economy.
One for the Future?
Although it remains a private company, Revolut is currently the most valuable UK fintech. It offers a number of financial products and services, including multi-currency bank accounts, international transfers and investing in the stock market.
After a drawn out process, Revolut recently secured a UK banking licence which will increase the financial services it can offer in the UK and should boost its prospects of securing banking licences in other key markets.
In a recent share sale by employees, Revolut was valued at $45 billion, making it not only the most valuable UK fintech company, but the most valuable in the whole of Europe.
Although there is no prospective date for a Revolut IPO, it is widely anticipated to take place within the next couple of years. Consequently, whilst not currently an option for retail investors, this could be a fintech company to watch in the future.
How to Invest in Fintech Stocks
With an Invest.MT5 account from Admiral Markets, you can invest in both fintech stocks examined in this article. In order to get started, follow these simple steps:
- Open an Invest.MT5 account and log in to the Dashboard
- Open the web trading platform
- Search for the fintech stock of your choice and click on the symbol to a price chart
- Enter the number of fintech shares you wish to purchase and click ‘Buy’ to send your order to the market!
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FAQs on Investing in Fintech
What are examples of fintech companies?
Block, MercadoLibre, PayPal and Wise are all examples of publicly traded fintech companies.
Is fintech a good investment?
Whilst there may be long-term growth opportunities in the world of fintech, due to the relative youth of the industry, investing in fintech stocks is not likely to be suitable for those with a low tolerance for risk. Before investing in fintech, it is important to analyse the fintech company in question and decide whether it aligns with your individual profile and investment goals.
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