Are Fintechs Making a Mega Comeback?

6 сент.

This chart, tracking the performance of PayPal PYPL, Coinbase COIN, Block SQ, and Robinhood HOOD over the past year. I think the chart offers a captivating glimpse into the potential return of a sector that has gone through a fairly large downturn, and drawdown, but continues to show resiliency.

I should add that this is also an area of the market that I am simply fascinated by, having spent my career deeply embedded in it, building, growing, and watching the stories emerge first hand. At the core, there are several powerful trends to look forward to well into the future. Although, like anything, the risks are massive.

The key question is: What does the future hold for the fintech sector and the new companies that coming up in this space? Will traditional financial powerhouses like JPMorgan and Bank of America reassert their dominance over the next decade and beyond, or will these startups disrupt the industry? Whether these are long-term buy and holds, depends entirely on that question.

While the charts above mostly show a new wave of retail participation in markets, from banking to investing, brokerages and consumer finance, there are several stats to observe in detail:

Retail Investor Surge: Retail investors now account for an estimated 20-25% of U.S. equity trading volume, up from around 10% a decade ago.

Commission-Free Trading: The rise of commission-free trading platforms has significantly lowered the barriers to entry for individual investors.

Digital Adoption: The COVID-19 pandemic accelerated the adoption of digital investing tools and platforms. Money went digital at its fastest rate ever as cash payments slowed dramatically.

The future of investing lies in providing accessible, user-friendly, and comprehensive financial services that empower individuals to take control of their financial futures. For the next part of my research piece, I'll briefly write about each company listed and where I think they are at:

PayPal's Resurgence: The recent rebound of PayPal, following a significant dip, is particularly noteworthy. It shows resilience. Despite the bad news and massive drop, they managed to keep the ship sailing in the right direction. Venmo remains a powerhouse.

Coinbase's Rollercoaster: Coinbase's trajectory mirrors the fluctuating fortunes of the cryptocurrency market. As the leading cryptocurrency exchange in the U.S., Coinbase's performance is intrinsically tied to the adoption and regulation of digital assets. If digital assets task over, Coinbase is uniquely benefited to be THE leader because of their current positioning. But, if it does not, well, that means it's possibly a zero.

Robinhood's Staying Power: Robinhood, despite weathering some reputational storms, remains a significant player, particularly among younger investors. Yes they started commission free trading, but the most interesting move they are making is into retirement, wealth management, and more. They are gaining a mega head start here, coming for Goldman and JP Morgan.

Block Keeps Going: Block seems to be caught between payments and crypto, attempting to bridge the gap between the two. They are having a harder time than most realize. But I have not forgotten that they are technically a bank, and there's no reason to think they don't have Bank of America in their sights over the long-term.

Anyways, I'll continue watching this sector. It's been a bumpy ride.

Disclaimer: This is my personal opinion and not financial advice. I only share for education and entertainment!