This past year has been a tough one in a lot of ways for many people, but not necessarily for investors. Sure, restaurants and brick-and-mortar retailers struggled under lockdown mandates and crimped consumerism, but e-commerce names thrived in the unusual circumstances caused by the COVID-19 pandemic.
Amid the various losses, there's a group of mostly overlooked stocks that quietly dished out huge gains in 2020, benefiting from the same swell of digital spending that boosted online shopping names like Amazon and pet supply outfit Chewy. Much of their business may not have happened at all were it not for the fintech names that helped make it possible to digitally transfer cash payments.
Here's a rundown of the five best fintech performers, from least great to the industry's biggest winner. (Spoiler alert: Not all of them are terribly big surprises.)
5. PayPal pays off for its investors
2020 year-to-date stock price gain: 117%
It makes sense that the earliest and now biggest name in online payments had a strong showing in 2020 despite its maturity. PayPal Holdings (PYPL 2.78%) shares have more than doubled in value this year largely because it was a familiar name for consumers who suddenly found themselves doing a lot more online shopping than they may have in the past.
Granted, PayPal's dominance has mostly been carved out within the computer/laptop shopping arena, and less so on the mobile wallet front. Apple and Alphabet's Google were well-positioned to help consumers convert their smartphones into payment-making devices.
Much of this year's gain may reflect the fact that PayPal is gaining ground on the mobile frontier though, unveiling "Pay in 4" in September -- which allows buyers to break their purchase price into four payments -- then announcing in October that it would allow its 26 million merchants to start accepting cryptocurrency as a form of payment.
4. Green Dot investors are deep in the green
2020 year-to-date stock price gain: 146%
Kudos to Green Dot (GDOT) for successfully melding the business of reloadable debit cards with an actual FDIC-insured bank and then connecting it all with a rather slick app. Although it doesn't operate any bank branches, its customers can make traditional deposits into their accounts, pay their monthly bills, and even withdraw cash -- often for free -- from participating ATMs.
It was already a complete solution for the underbanked, or for people who simply didn't want to bother with a traditional checking account. But the pandemic may have cemented its place with this segment of consumers. Its third-quarter top line was up 22% year over year, driving a 35% improvement in adjusted net income.
The kicker: In November, Green Dot announced it will be integrating its platform with Google's Google Pay, which will introduce brand new consumers to the Green Dot brand.
3. Actually, MercadoLibre is South America's PayPal
2020 year-to-date stock price gain: 172%
The numbers MercadoLibre (MELI -0.97%) is putting up this year have shown this unusually named company is a serious fintech player. The digital payment company's top line through the first three quarters of 2020 is 63% better than where it was at the same point last year, with its third-quarter sales up an incredible 85% year over year.
If you've never heard of it, there's a good reason -- the e-commerce outfit mostly operates in Brazil, Mexico, Argentina, and other Latin American countries. It's earning a reputation in those countries on par with Amazon's reputation in the U.S. The comparison is certainly an accolade, but it's not an entirely accurate one. MercadoLibre is also Latin America's leading online payment platform for goods not sold through its online shopping site, meaning it's as much like PayPal or Square (SQ 4.79%) as it is Amazon. Indeed, only about a third of the transactions MercadoLibre's Mercado Pago payment platform handles are driven by its in-house e-commerce effort.
2. Adyen is targeting U.S. consumers and U.S. companies
2020 year-to-date stock price gain: 184%
This is another name that might ring a bell, but for reasons you can't quite remember. This will jog your memory: Adyen (ADYE.Y 0.99%) became eBay's preferred payment middlemen back in 2018, once eBay decided it wanted to step away from a long-standing relationship with PayPal and transact with other fintech services.
The jury's still out as to which company is better off with the new arrangement, which in many regards is still being sorted out. But there's little doubt that the new Dutch partner is doing very well in the wake of the coronavirus pandemic. Adyen's shares have nearly tripled in 2020 thus far, driven by a surge in business. Third-quarter revenue was up to the tune 25% year over year, on a 26% increase in total volume of processed payments.
That being said, much of this year's 184% gain for Adyen shares may have a great deal to do with the partnerships it's directly forging with a bunch of U.S. brands. Foot Locker, Columbia Sportswear, and sandwich chain Subway are just some of the local names tapping Adyen for its tech offerings.
1. Square's big bitcoin boost
2020 year-to-date stock price gain: 261%
Finally, Square knocked it out of the park this year, with a 261% romp since the end of 2019 that handily outpaced all other fintech stocks.
In some ways, it's a surprising gain. Square is arguably best known as a credit card acceptance solutions provider for small businesses, but small businesses have been the most hampered by shutdowns and slowdowns.
However, Square is anything but just card-reading technology anymore. This company offers online marketplace platforms, restaurant delivery tools, digital invoicing options, flexible credit cards, and apps that facilitate contactless checkouts. Perhaps most important, it was already tiptoeing into the cryptocurrency space even before the pandemic took hold. In many ways, Square's been built to thrive in the current environment by giving small businesses the types of tools they actually need.
The idea is meted out in the numbers. The company's top line through the first three quarters of 2020 is up 86% year over year, with bitcoin-based revenue driving the vast majority of that growth.
Traders may also be betting big on the idea that these recent initiatives will still be crucial solutions even after the coronavirus pandemic abates.