The U.S. Treasury Department sent out three stimulus checks over the past year to help individuals cope with the financial impact of the pandemic. Nearly half (49%) of those recipients used their checks to pay off debt, according to three Household Pulse surveys conducted last month. Another 32% mostly saved or invested the cash, while the remaining 19% mostly spent it.

Vaccination rates are rising and more businesses are reopening, but a fourth stimulus check or even recurring monthly payments could still be on the table. It's unclear if the government will approve those plans, but these three fintech stocks would likely benefit from more stimulus checks: PayPal Holdings (PYPL -1.84%), Square (SQ -3.84%), and Coinbase Global (COIN -6.56%).

A stimulus check placed on top of a $100 bill and an American flag.

Image source: Getty Images.

1. PayPal

PayPal, which more than doubled its active accounts from 181 million to 377 million between 2015 and 2020, continued growing throughout the pandemic as more people used digital payments.

PayPal also owns the peer-to-peer payments app Venmo, which hosts nearly 70 million active accounts. PayPal's namesake app already allows its users to cash and deposit checks, but it expanded the feature to Venmo earlier this year to address the influx of stimulus checks.

Roughly half of Venmo's users are younger millennials between the ages of 25 and 34. Only 30% of PayPal's users fall into that age group. Therefore, another round of stimulus checks could increase Venmo's stickiness with younger users.

During its latest conference call, PayPal noted the latest stimulus checks boosted consumer spending during the first quarter. CFO John Rainey said he didn't want to "overstate" the impact of the most recent stimulus payment, since some of the benefits had been baked into its guidance, but CEO Dan Schulman declared the secular shift toward digital payments would "remain essentially unchanged in a post-COVID world."

Analysts expect PayPal's revenue and earnings to rise 20% and 22%, respectively, this year. Those growth rates are already impressive, but they could rise even higher if the government sends out additional stimulus payments.

2. Square

PayPal's fintech rival Square also profited from the previous stimulus measures in three ways. First, some of Square's merchants -- which use its point-of-sale systems and access its seller services -- received support from the government's paycheck protection program (PPP) loans. Customers also spent some of their stimulus checks at those businesses.

A woman uses a mobile payments app.

Image source: Getty Images.

Second, many consumers deposited their checks into Square's Cash App, which competes against Venmo in the peer-to-peer payments market. The app, which serves over 36 million active customers, saw a 55% jump in inflows between February and March as more users deposited their checks. That metric dipped 16% in April, but Square said its inflows remained at "elevated" levels.

Lastly, many of the Cash App's users spent their stimulus checks on the platform's Bitcoin (BTC -4.14%) purchases and free stock trades. Square claims more than 3 million customers purchased or sold Bitcoin on the Cash App throughout 2020. PayPal only added cryptocurrency purchases to its main app last October, and it doesn't offer any stock trading options yet.

Analysts expect Square's revenue and earnings to surge 114% and 79%, respectively, this year. However, a new round of stimulus checks might inject even more growth into its merchant and consumer-facing businesses.

3. Coinbase

Square gives investors some exposure to the cryptocurrencies through the Cash App and its own Bitcoin holdings, but Coinbase is an all-in play on the cryptocurrency market.

Coinbase owns the world's largest cryptocurrency exchange platform. Its median trading volume rose 24% to $21 billion in 2019, then surged 81% to $38 billion in 2020 as cryptocurrency trading surged throughout the pandemic. A lot of that interest was driven by retail investors, some of whom spent their stimulus checks on cryptocurrencies.

A recent survey by Mizuho Securities found that 10% of stimulus checks were likely spent on Bitcoin and stocks, with Bitcoin accounting for 60% of that value. Mizuho analyst Don Dolev estimates those stimulus-induced Bitcoin purchases could account for as much as 2% to 3% of Bitcoin's current value.

Therefore, Coinbase could benefit from another round of stimulus checks, especially if interest in cryptocurrencies remains elevated. Wall Street expects Coinbase's revenue to more than quadruple this year -- but those forecasts are arguably unreliable since its growth is tightly pinned to the volatile cryptocurrency market. Those estimates also likely don't account for another round of stimulus checks.

The key takeaways

PayPal, Square, and Coinbase would all likely experience an uptick in digital transactions if Americans receive more stimulus checks. Growth-oriented investors should take a closer look at these promising fintech stocks, but they should also be aware that their higher valuations might temporarily cap their gains as the market rotates from growth to value plays.