In this piece, we will take a look at the 13 most promising fintech stocks to buy. If you want to skip our detailed analysis of the financial technology industry, then you can skip ahead to 5 Most Promising Fintech Stocks To Buy.
The finance industry is one of the largest in the world. Banks have been working for centuries to manage money and make payments for businesses, and throughout its history, the industry has had to keep up with the times. To understand just how old the finance system is, consider the world's largest private bank in terms of assets, JPMorgan Chase & Co. (NYSE:JPM). JPMorgan traces its history back to the days of the American Revolution, as it was acquired by Chase Manhattan bank in 2000 to become the biggest bank holding company in the U.S. Chase Manhattan itself was initially set up in 1799, making it one of the oldest banks in the world. However, JPMorgan isn't the oldest bank in the world, with one of the oldest financial institutions being Banca Monte dei Paschi di Siena S.p.A. - a state owned Italian bank that was set up in 1624 and traced its roots back to 1472.
The world, if you're unaware, has significantly changed since 1472. Now, banks and financial institutions process thousands of transactions daily and move money thousands of miles across the world. Similarly, companies like PayPal Holdings, Inc. (NASDAQ:PYPL) and Block, Inc. (NYSE:SQ) have leveraged technology to serve a larger number of people who are covered by the financial system. Banking, like gasoline, is a commodity and the lack of access to a bank account often means that people cannot perform or earn to their full potential. After all, Apple Inc. (NASDAQ:AAPL) is unlikely to pay its employees hundreds of thousands of dollars each year in cash, and anyone who cannot open a bank account often misses out on financial opportunities.
The intersection of the finance industry and modern day computing technology is dubbed 'fintech'. Short form for financial technology, the fintech sector is simply defined as the use of technology to steal market share away from traditional financial providers when it comes to managing finances for businesses or enabling consumers to spend, save, or earn their money. Naturally, this potential of being able to cater to millions of consumers and businesses means that the right financial technology companies can be quite valuable.
As an illustration, consider the consulting firm McKinsey's estimate of the total market value of publicly traded fintech companies as of July 2023. According to the firm, these companies were worth $550 billion, a two fold increase over the four years since 2019. While this figure is quite sizeable on its own, it doesn't represent the full value of the fintech sector since McKinsey adds that fintech unicorns were worth an additional $936 billion for an unbelievable growth from the $1 billion in value just five years back.
Yet, just like the broader stock market, the fintech sector is also subject to the whims of the global economy. Venture Capital funding in fintech companies stood at $19.4 billion in 2015 to sit at $33.3 billion in 2020. Just like the coronavirus pandemic saw money flow into technology companies on the back of stronger demand for their products, money also piled into the fintech sector as $92.3 billion was poured into these companies in 2021 as users turned to the digital realm for their financial needs in the wake of lock downs and economic disruption.
Similarly, just as other industries are now desperately seeking the integration of artificial intelligence, so is the financial technology industry. So much so that one of the biggest payment platforms and service providers in the world, Mastercard Incorporated (NYSE:MA) recently published a report highlighting the ten ways in which GenAI can disrupt the banking and financial sectors. According to Mastercard, these use cases include preventing fraud, bringing new clients on board, issuing credit, managing loyalty programs, enabling the wealthy to manage their money, and offloading some customer support to chat bots.
With GenAI being all the hype and technology continuing to break boundaries, we decided to look at the most promising fintech stocks according to hedge funds. Some notable names are Mastercard Incorporated (NYSE:MA), Visa Inc. (NYSE:V), and JPMorgan Chase & Co. (NYSE:JPM).
13 Most Promising Fintech Stocks To Buy
A customer using a mobile banking app at home to securely transfer money.
Our Methodology
To make our list of the fintech companies that are promising according to hedge funds, we ranked the constituents of the BlackRock Future Financial and Technology ETF by the number of hedge funds that had bought them as of Q3 2023. Out of these, the top fintech stocks are as follows.
Synchrony Financial (NYSE:SYF) is an American credit provider headquartered in Stamford, Connecticut. It provides credit cards, loans, and other financial products. The firm spent November 2023 divesting its pet insurance division to free capital for core business functions.
As of Q3 2023, 41 out of the 910 hedge funds covered by Insider Monkey's research had held a stake in Synchrony Financial (NYSE:SYF). Paul Reeder and Edward Shapiro's PAR Capital Management was the firm's largest shareholder as it owned 8.4 million shares that are worth $256 million.
Synchrony Financial (NYSE:SYF) joins Visa Inc. (NYSE:V), Mastercard Incorporated (NYSE:MA), and JPMorgan Chase & Co. (NYSE:JPM) in our list of the most promising fintech stocks to buy.
Discover Financial Services (NYSE:DFS) is an American digital bank that offers branchless products and services. Turmoil in the U.S. student loan sector and high interest rates sapping demand is making the firm consider selling its student loan business division.
By the end of September 2023, 46 out of the 910 hedge funds part of Insider Monkey's survey had bought the firm's shares. Discover Financial Services (NYSE:DFS)'s biggest investor is John Smith Clark's Southpoint Capital Advisors as it owns $210 million worth of shares.
Global Payments Inc. (NYSE:GPN) is a financial technology company that offers services that allow for payment processing all over the world. The firm has beaten analyst EPS estimates in all four of its latest quarters and the shares are rated Strong Buy on average.
Insider Monkey's third quarter of 2023 survey covering 910 hedge funds revealed 47 Global Payments Inc. (NYSE:GPN) shareholders. William B. Gray's Orbis Investment Management was the largest shareholder due to its $824 million investment.
Capital One Financial Corporation (NYSE:COF) is an American bank with a presence in the U.S., Canada, and the U.K. The firm's investors were in for some good news in December 2023 when Bank of America upgraded the share rating to Buy from Neutral and raised the share price target to $129 from $112.
By the end of this year's third quarter, 49 out of the 910 hedge funds profiled by Insider Monkey had held a stake in the company. Capital One Financial Corporation (NYSE:COF)'s biggest investor in our database is Natixis Global Asset Management's Harris Associates through its $1.8 billion stake.
Nu Holdings Ltd. (NYSE:NU) is a Brazilian digital bank that provides all traditional banking services as well as a cryptocurrency trading platform. The firm had a strong third quarter that saw it grow its revenue by 53% annually to $2.1 billion.
Insider Monkey dug through 910 hedge fund portfolios for their September quarter of 2023 shareholdings and discovered that 50 had bought a stake in Nu Holdings Ltd. (NYSE:NU). Out of these, the largest stakeholder was Warren Buffett's Berkshire Hathaway as it held a $776 million stake.
8. Fidelity National Information Services, Inc. (NYSE:FIS)
Number of Hedge Fund Investors In Q3 2023: 55
Fidelity National Information Services, Inc. (NYSE:FIS) is a backend financial firm that caters to the needs of firms for processing their payments, managing risk, and conducting other operations. The firm has struggled on the financial front as of late, since it has missed analyst EPS in three out of its four latest quarters.
As of September 2023 end, 55 out of the 910 hedge funds surveyed by Insider Monkey were the firm's investors. Fidelity National Information Services, Inc. (NYSE:FIS)'s biggest investor is Seth Klarman's Baupost Group as it owns 6.9 million shares that are worth $384 million.
Block, Inc. (NYSE:SQ) is a pure play financial technology company that provides everyday people with the ability to make payments and manage their money. While it was one of the first firms of its kind to offer digital wallets, 2023 has seen Block, Inc. (NYSE:SQ) struggle to retain market share as competitors flood the market.
During this year's third quarter, 60 out of the 910 hedge funds profiled by Insider Monkey had bought Block, Inc. (NYSE:SQ)'s shares. Andreas Halvorsen's Viking Global was the largest shareholder courtesy of its $545 million investment.
Fiserv, Inc. (NYSE:FI) provides a wide variety of financial technology services such as fraud detection, mobile payments, and point of sales processing. Its shares are rated Buy on average and analysts have set an average share price target of $144.67.
70 out of the 910 hedge funds part of Insider Monkey's Q3 2023 database had held a stake in the company. Fiserv, Inc. (NYSE:FI)'s biggest hedge fund investor is Natixis Global Asset Management's Harris Associates due to its $1.6 billion stake.
Mastercard Incorporated (NYSE:MA), Fiserv, Inc. (NYSE:FI), Visa Inc. (NYSE:V), and JPMorgan Chase & Co. (NYSE:JPM) are some promising fintech stocks according to hedge funds.
