In the past month, financial technology giants SoFi and Coinbase both announced their plans to go public. While neither will be conducting a traditional initial public offering (IPO), their market debuts are a sign that the IPO frenzy of 2020 will continue into 2021 -- at least for top fintechs.
Fintechs are revolutionizing the way we handle payments and our personal finances, and their services are likely to be of increasing importance in our digitized economy. For investors looking for potential opportunities to profit from this trend, here are three huge fintech companies that could go public soon.
Stripe offers payment processing and easy interfaces for e-commerce websites and mobile applications. Simply put, it allows businesses to process credit cards and debit cards online and offline, facilitating the transfer of money from one bank account to another.
While it started as just a payments platform, the company has evolved into a banking-as-a-service (BaaS) platform. BaaS is a key component of open banking because it allows any company to build banking-like offerings on top of Stripe's regulated infrastructure.
Stripe's services are used across 120 countries by millions of companies, including giants such as Amazon, Google, and Salesforce.com. In a September 2019 funding announcement, management said it processes "hundreds of billions of dollars" in transactions and was estimating revenue of $3.4 billion for that year. In its last fundraising round in April, the company was valued at around $36 billion.
However, it is estimated that Stripe's valuation could be as high as $100 billion once it hits the public market. This would make it the biggest IPO since December 2019, when oil and energy behemoth Saudi Aramco went public at a valuation of almost $1.9 trillion.
Klarna is a Swedish bank that provides online financial services such as payments processing for e-commerce sites, direct payments, and post-purchase payments. The initial idea was to provide customers and merchants with safer and simpler online payment methods. The company has grown into one of Europe's largest banks, offering an alternative to credit cards with its pay-after-delivery options and installment plans -- capitalizing on the growing "buy now, pay later" trend.
The company touts 21 million users globally on its fast-growing platform, and claims a 10% market share in European e-commerce. In a recently released financial update, it said that for the first three quarters of 2020, net operating income rose by 37% year over year to $742 million. It has partnered with more than 200,000 retailers, including such well-known names as Etsy, Macy's, and Samsung.
Recently, the bank has intensified its efforts in the U.S. market. In October, management announced the number of U.S. users of its app had hit 2 million, and also noted that its app downloads accounted for 64% of all "pay later" app downloads in the U.S. A round of funding in September valued the bank at $10.65 billion.
Marqeta specializes in issuing cards and processing payments -- and is deploying revolutionary fraud-prevention tools in the process. Its open-software platform is easy for retailers to plug into. Marqeta caters to clients that want to control how digital payments are authorized. It has partnered with some of the fastest-growing start-ups out there -- names such as Square, Instacart, Kabbage, and Uber -- which has helped its business grow alongside them.
Among the services Marqeta provides, it give companies the ability to set up specialized authorization protocols to increase transaction security and prevent card misuse. For example, DoorDash partnered with Marqeta to issue debit cards for its "Dashers" that only work when the delivery person is at the correct restaurant, and will not authorize transactions for values in excess of the customer's order amount. Over the past two years, Marqeta's technology has helped delivery companies cut fraud in half, to 5% or less.
Given the transformative technology Marqeta is using, it's easy to see why Mastercard and "buy now, pay later" firm Afterpay wanted to form partnerships with it. In the company's last funding round in May, its valuation was pegged at $4.3 billion, and according to a recent Bloomberg article, sources say it's looking at a valuation of around $10 billion if it does decide to go public this year.