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Investing in Fintechs: Square, PayPal, and Adyen

By Matthew Frankel, CFP® and Brian Withers – Aug 31, 2021 at 6:42AM

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Here are the key differences between the three and more.

When it comes to payment processing fintech companies, Square (SQ -1.43%), PayPal Holdings (PYPL -4.93%), and Adyen (ADYE.Y -1.46%) are in a class by themselves. In this Fool Live video clip, recorded on Aug. 23, contributors Matt Frankel, CFP, and Brian Withers discuss the major differences between the three, as well as a viewer's question on how much they should invest in one of them. 

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Brian Withers: I'm going to take Prakash's question first, I would like to put 25% of my portfolio in Square and hold it for five years. Do you think this is a risky allocation?" That depends, and we can't give personal advice. But let me talk a little bit about how I think of investing in a company. If right now, if 25% of your portfolio and you only have five to 10 stocks, that might not be a big piece. If you're continuing to work and continuing to put money into the market every month, that 25% is going to get diluted over time. I absolutely love your hold-for-five-years perspective and I think Square is going to do well over the next five years. Just really think about your allocation and in what you want to do there and make sure you're diversified.

Matt Frankel: We have time for one more?

Withers: Yeah.

Frankel: OK. I will answer the one from Brand New Fool that says how does Adyen compare to Square and Afterpay. Adyen is based in the Netherlands. They are really a truly omnichannel player. When I think PayPal, I think mostly online. I mentioned I bet they have a 95% card-not-present rate. When I think of Square, I think mostly in-person. Adyen does both. They have been very successful more so than Square and PayPal at larger merchants. I believe Uber is an Adyen client. Microsoft uses Adyen for payment processing. A lot of the big, big companies in the world do. They were the ones who replaced PayPal at eBay, if you remember the big news story a year ago where PayPal dropped eBay as their preferred payment processor. Adyen specializes in big merchants. They are a truly international company. They operate throughout most of the world. North America is I think a quarter or their revenue, which is a big, big thing. It's an interesting market. It's a different kind of focus. It's omnichannel, large merchants, whereas PayPal and Square are both more specialized, I would say.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Matthew Frankel, CFP owns shares of Square. The Motley Fool owns shares of and recommends Adyen N.V., Microsoft, PayPal Holdings, and Square. The Motley Fool recommends Adyen, Uber Technologies, and eBay and recommends the following options: long January 2022 $75 calls on PayPal Holdings and short October 2021 $70 calls on eBay. The Motley Fool has a disclosure policy.

Stocks Mentioned

PayPal Stock Quote
$74.66 (-4.93%) $-3.87
Microsoft Stock Quote
$255.02 (0.13%) $0.33
eBay Stock Quote
$45.20 (0.09%) $0.04
Uber Technologies Stock Quote
Uber Technologies
$28.75 (1.45%) $0.41
Block Stock Quote
$68.18 (-1.43%) $0.99
Adyen N.V. Stock Quote
Adyen N.V.
$15.54 (-1.46%) $0.23

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

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