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1 Fintech With Tremendous Growth Potential

By Matthew Frankel, CFP® and Brian Withers - Updated Jun 23, 2021 at 7:25AM

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You may not have heard of this fintech, but it's one you should put on your radar.

When it comes to financial technology, or fintech stocks, nCino (NCNO) isn't exactly a household name. But in this Fool Live video clip, recorded on June 3, Fool.com contributor Brian Withers discusses why more investors should pay attention to it. 

Brian Withers: Interesting story about how nCino was founded. They were part of Live Oak Bank in 2009. Live Oak started to build a really comprehensive digital back end to help automate a lot of their processes, make them more digital rather than shuffling paper between departments, and they realized this is not just a problem that they were dealing with themselves, but it was a problem industrywide. They were spun out. The person who started the company started the division in the Live Oak became its CEO. They spun it out as a company in 2011 and he's been the CEO since then. It's got a small market cap of $5.8 billion, but as you'll see, it's got a massive market opportunity.

I explained a picture of what the process flow for a bank might be behind the scenes. This isn't a customer-facing product. This is very much a back-end operations of how the bank deals with their products and their paperwork. Of course, you have this nice nCino platform. What's cool is, it's got client onboarding activities here, commercial small business retail, etc. Because it's built on the Salesforce platform, it's got open APIs, application programming interfaces which make it really easy to hook into, source systems, and set up the process. Then it's got a bunch of data mining capabilities here too. The other piece of this is you can install a small part of it and then grow with it over time. Same with the Veeva system. Bank spend a ton of money. You can see how much they spend in 2018, $376 billion in IT spend, and $63 billion was for software. The investments in software as a service is expected to grow more than doubled over the next five years.

These are the cool things that nCino brings to customers who install this stuff. You can increase the number of loans, you have an efficiency improvement, you have cost savings, they retired 10 legacy applications, and there's compliance advantages as well. There's really significant benefits to install these systems across the board of whether it's cost revenue, risk reduction, or efficiency. Here's some land-and-expand examples between community regional customers, enterprise customers, and global customers. You can see they service banks from $6 billion in size to $1.5 trillion. They've landed and expanded on all of these and it makes a beautiful, beautiful revenue picture over time. Similar to what Veeva has done, is the customers that are with nCino longer, have larger spend than their initial spending over time. Dramatic run-up in subscription revenues. You can see their subscription revenues over the past three years have grown almost 60% year over year. It's expanding globally. Has seven offices globally, 120 languages, 140 currencies. The stock is down. It's recently a public company. It's still expensive at 27 price-to-sales ratio. But, if you want to read more about nCino, Nick Rossolillo posted a really great article to talk about it if you want to find out more. That is nCino, NCNO.

Brian Withers owns shares of Veeva Systems. Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Live Oak Bancshares, Salesforce.com, Veeva Systems, and nCino, Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

nCino, Inc. Stock Quote
nCino, Inc.
NCNO
Salesforce, Inc. Stock Quote
Salesforce, Inc.
CRM
$183.77 (-2.21%) $-4.16
Veeva Systems Inc. Stock Quote
Veeva Systems Inc.
VEEV
$219.21 (-2.31%) $-5.19
Live Oak Bancshares, Inc. Stock Quote
Live Oak Bancshares, Inc.
LOB
$39.26 (-4.27%) $-1.75

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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