Here are 12 fintech stocks that stand to benefit as digital finance takes off
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Fintech — or “financial technology” — has grabbed investor attention like no other trend in the past few years.
Broady speaking the category covers just about any technological innovation in the financial sector and has even generated spin-offs like “regtechs” which manage regulatory requirements and “insuretechs” which provides efficiencies in the insurance space.
At its core, however, a fintech generally improves the way we make transactions or investments.
Fintechs will process an incredible $US8 trillion in annual transactions by 2022, according to a 2018 market outlook report from Statista.
In the Asia-Pacific region, the market will be worth $US76 billion by 2020, including $4.2 billion in Australia, estimates researcher Frost and Sullivan.
There are about a dozen ASX-listed fintechs that come under this category (see table below). Of these, seven are showing share price gains over the past year.
>> Scroll down for a table of 12 ASX-listed fintechs focused in the payments and consumer finance space
The ASX group includes alternative lenders, payments platforms, blockchain transaction businesses and new banking models and systems.
In particular, investors should look out for fintechs focused on the key growth areas of personal finance and payments space, especially among the 18-34 year old age bracket.
Triple digit growth
Some ASX-listed fintechs are showing triple-digit share price gains such as Peppermint Innovation (ASX:PIL), a mobile banking and payments operation that lets merchants accept payments with their mobile phones. The stock is up 212 per cent over the past year to 2.5c.
Millennial-focused instalment payments startup Afterpay Touch (ASX:APT) may be new to the ASX, but it is not a small operation. The company now has a market cap of more than $2 billion and is up more than 200 per cent over the past 12 months.
Other players, like Goldfields Money (ASX:GMY) are looking to become banking alternatives by providing app-focused banking, online loan applications and insurance options. Goldfields is up 31 per cent over the past 12 months.
However, not every ASX hopeful targeting the millennial market has had immediate success. Since listing two weeks ago, investing app Raiz Invest (ASX:RZI) is down 37 per cent on its offer price.
Beyond the ASX, there’s a huge range of fintech businesses looking to develop products or raise venture capital. On the banking front, digital operator Xinja completed one of the first equity crowdfunding raises in Australia this year, raising $2 million.
Here are two key trends that will impact fintech stocks from CB Insight’s 2018 Global Fintech Report:
1. “Blockchain deals” are on the rise
There’s a growing trend for “blockchain fintech deals”, particularly in the US, where fintechs are getting funding for blockchain partnerships or projects with digital tokens.
This echoes a suggestion from KPMG fintech experts that blockchain tech will mature in 2018 beyond cryptocurrency to actual applications.
On the ASX, some companies have already incorporated crypto or blockchain projects into their businesses.
Change Financial (ASX:CCA), which runs mobile banking platform Chimp Change, announced plans this week to acquire all of the “Ivy Entities” behind the Ivy blockchain project. Ivy is developing a solution to money-laundering concerns around cryptocurrencies by developing de-anonymised blockchain payments.
Change Financial is up 10 per cent for the year to 65c.
2. Alternative lending and payments remain attractive
According to CB Insights, if you look to the more mature US markets, big investors like JP Morgan have consistently favoured fintechs in the alternative lending and payments spaces over the past couple of years, even when during periods where venture capital deals have slowed down.
The alternative lending space has seen significant movement in Australia over the past two years, with a range of non-bank lenders emerging to offer businesses and consumers another option to the big four banks.
In June, business lender Prospa dramatically placed the brakes on its ASX listing, but there are still other digitally-focused lenders already on the exchange. One of these is car and personal loan platform Money3 (ASX:MNY), with a share price up 49 per cent over the past 12 months to $1.97.
At the start of 2018, global co-leader of KPMG’s fintech practice Ian Pollari predicted the market would move to the “next generation” of digital lending in 2018, including the emergence of online mortgage technology and platforms.
There are already a number of property-focused fintechs away from the ASX, including mortgage brokerage disruptor Joust, which has signposted an upcoming equity crowdfunding campaign via OnMarket, and BRICKX, the property micro investing platform that lets users buy a tiny piece of a house for as little as $100.
Here’s a table of 12 ASX-listed fintechs focused in the payments and consumer finance space