Fintech, short for financial technology, is a field that leverages technology to offer traditional financial services more efficiently. At the end of 2017, I wrote that the three best fintech stocks to buy at the time were Mastercard, PayPal Holdings, and Square. Since that piece was published, those stocks have appreciated 29%, 17%, and 79%, respectively, crushing the S&P 500's negative 2.4% return over the same time period. But that's not thanks to my stock-picking prowess; it's easy to make good picks when investing in companies operating in fast-growing markets where some of the world's greatest innovations are occurring.

While I still hold shares of all three of the companies above, I believe the best fintech stock to buy now might be a little-known, founder-led, small-cap SaaS (software-as-a-service) company that's changing the way large businesses do accounting. For that reason, I am happy to introduce investors to BlackLine Inc (NASDAQ:BL).

A man holding a tablet that reads "FINTECH financial technology."

BlackLine's platform automates tedious and labor-intensive accounting practices, giving large corporations real-time data on important information. Image source: Getty Images.

What BlackLine does

BlackLine automates and standardizes complex accounting tasks that have traditionally been labor-intensive. Businesses have generally used batch processing, taking "batches" of different data sources and processing them all at once at the end of a specified period, such as a month or quarter. The disadvantage to this method is that it inputs data that can already be outdated by the time it's entered.

Enter BlackLine. BlackLine's cloud-based platform enables companies to perform continuous accounting, importing data as soon as it becomes available. This eliminates the need for huge workloads to reconcile books at a month's or a quarter's end, and gives companies real-time data on important sales trends. 

BlackLine's platform integrates seamlessly with companies' existing enterprise software packages, making it easy to use and implement. The company also continues to add supplemental features to its existing capabilities, giving it several products it can upsell to existing clients. For instance, Smart Close eliminates 80% of the manual tasks related to closing and reconciling books by automating work flows and giving analysts easy access to each transaction. When it's done, Smart Close generates reports that can be accessed from anywhere. 

Another of BlackLine's products is the Intercompany Hub, which was introduced in late 2015. BlackLine management states that transactions between companies under the same corporate umbrella "are some of the most complex and frequent sources of uncertainty for the accounting function." The Intercompany Hub automates these tricky transactions by performing three steps:

1) Creating "a simple, structured workflow approval process" for all such requests;

2) Recording these transactions while accounting for all exchange rates, invoicing requirements, and taxes; and

3) Generating "a real-time, aggregated settlement matrix, which shows the balance of transactions across an entire organization." 

It is these types of products that make BlackLine's platform so invaluable to large enterprise customers.

The land and expand growth strategy

The company certainly is seeing success in driving sales with existing customers. In BlackLine's Q3, total revenue rose to $58.7 million, a 29% increase year-over-year. The company's net revenue retention rate was 109%, meaning that the company's existing customers from the previous year's third quarter spent 9% more this year. In the company's conference call, transcribed by S&P Global Market Intelligence, founder and CEO Therese Tucker stated:

[W]e have continued executing on a multiyear, multipronged strategy of expanding our strategic footprint inside of large enterprise customers. This effort has included ... creating a more expansive and strategic product platform ... Since going public, we have landed our largest deal to-date in 5 of the last 8 quarters. The average deal size of our top 10 customers has grown by over 80%, and our top 50 customers by approximately 50%. The average user price has increased at a double-digit rate in every quarter. Three of our top 10 customers have the Intercompany Hub, and 3 have Smart Close, which we think represents both great progress and a great opportunity. We estimate that 60% of our top 20 customers are engaged in a digital finance transformation project. These metrics confirm that our strategy is spot-on and that larger deals are important to drive customer value, as well as grow our business.

Of course, the more products and features a company subscribes to, the less likely that company is to leave BlackLine's accounting ecosystem. In Q3, management didn't give details beyond saying that it saw "strong customer renewal rates." In the Q2 conference call, however, management gave a bit more color, stating that customer renewal rates were in the high-90s percentile range for enterprise customers and the low- to mid-90s percentile range for middle market customers. Customers are clearly seeing value in BlackLine's offerings.

BlackLine's strong positioning for 2019

Beyond increasing sales with existing customers, the company is also increasing its customer base. In Q3 BlackLine added 92 net new customers in the third quarter, increasing its total customer count to 2,494, good for a 19% increase over last year's third-quarter total. Finding new customers might have just gotten easier, too: BlackLine announced a new sales agreement with SAP SE (NYSE:SAP) that will allow SAP sales representatives to directly sell BlackLine's accounting solutions.

BlackLine has an incredible opportunity in front of it, with an amazingly loyal customer base that it can upsell additional products to and new ways it can reach even more customers. I believe BlackLine is the best fintech company to buy now and hold for 2019 (and beyond). I will be adding shares to my own personal portfolio as soon as Motley Fool disclosure guidelines allow.

Matthew Cochrane owns shares of Mastercard, PayPal Holdings, and Square. The Motley Fool owns shares of and recommends Mastercard, PayPal Holdings, and Square. The Motley Fool owns shares of BlackLine, Inc and has the following options: short January 2019 $82 calls on PayPal Holdings and short January 2019 $80 calls on Square. The Motley Fool has a disclosure policy.