ASX fintech stocks 2020: Can the BNPL boom continue into next year?
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A number of ASX fintech stocks caught the market’s attention in 2020, as some strong sector narratives emerged in the wake of the COVID-19 crisis.
Chief among them was the rise of the buy now, pay later (BNPL) sector, which caught a huge tailwind from the ecommerce boom as the pandemic caused drastic changes in the way people shop.
B2B payments also saw plenty of activity, with a number of ASX players now competing to get a slice of the multi-billion dollar payments pie as new technology disrupts the sector.
Looking back on the year that was, we’ve provided a summary analysis of each sector with the price action to Friday December 18 — both year-to-date returns, as well as the change since the COVID-19 nadir on March 23.
Investors have responded positively to top-line growth rates in the sector, as a number of BNPLs reported a surge in new customers and transaction volume in the wake of the pandemic.
With that top-line growth yet to translate into net profits, BNPL has also become a key talking point among investors.
Will growth rates slow as competition heats up and regulators enforce stricter rules around credit provision and surcharge rules?
Or has the sector been the catalyst for fundamental changes in how consumers pay for goods and services?
Heading into 2021, investors are likely to be keeping a close eye on trading updates and signs of industry consolidation, to see whether the post-pandemic growth rates look sustainable over the medium term.
By the end of 2020, there were nine companies in the payments space looking to build out business models with both a domestic and regional focus across the Asia-Pacific.
There’s some crossover with BNPL, with payments companies such as IOUPay (ASX:IOU) including a BNPL offering as part of their product mix.
To try achieve scale, many companies in the space have taken partnership approach, either joining forces with other ASX companies are coming on board with the global payments giants to enhance distribution.
Across the board, ASX payments small caps outperformed in 2020. But like most sectors, investors that got in at the bottom of the COVID-19 cycle would’ve outperformed, as all 10 companies on the Stockhead list posted gains of at least 100 per cent.
Like other fintech sectors, the lending cohort has posted some strong returns for investors that took advantage of the COVID-19 selloff.
But the year-to-date returns were a mixed bag — a possible indicator that investors are yet to fully embrace the value proposition of direct lenders compared to red hot sub-sectors like BNPL.
Like payments players, a number of ASX fintech lenders have used partnerships to build out “capital-light” lending models, where larger banking partners provide the balance sheet muscle to underpin loan books.
Although a smaller cohort, Douugh (ASX:DOU) and Raiz Invest (ASX:RZI) both use tech platforms to offer customers exposure to savings products and simple investment vehicles.
Douugh got off to a particularly hot start after joining the ASX boards in October, rising from a listing price of 3c to a high of more than 30c.
Raiz bounced back from the March selloff to climb steadily throughout the year, with investors focused on whether it can continue building user numbers for its savings and investment app with a growth strategy focused on south-east Asian markets.