In some form or another, money has flowed through society since its earliest days. But over time, technology has changed how. And it's still changing today. The world is more digital than it's ever been. Simply paying cash or punching in payment card information is no longer flexible enough for some of today's innovative new technologies.
This Fool has his eyes set on three fintech stocks that have the potential to make the world better and make you money. These three stocks could outperform the market through 2030.
1. SoFi Technologies
Banks are found in every neighborhood across America. Past and present generations grew up sitting at the bank to open their first savings or checking account, or get their first credit card. But as much as they've tried to keep up with the times, traditional banks can sometimes feel dated and struggle to adapt to a digital world.
SoFi Technologies (SOFI +5.07%) is taking advantage of that. It's a digital bank with no physical branches -- instead, it uses a smartphone app to offer banking, student loans, savings, credit scores, education, investing services, and more.
NASDAQ: SOFI
Key Data Points
It's not that other banks don't offer online banking, but SoFi's app is appealing to the masses. The company has grown its customer base from one million at the beginning of 2020 to just under seven million through September of 2023. The customer growth is impressive enough, and SoFi's app makes it easy to cross-sell other financial products at little marketing cost once a customer uses it. Look for cross-selling to contribute to revenue growth over time.
SOFI Revenue (TTM) data by YCharts
SoFi's brand and product are working. The company acquired its banking charter roughly two years ago, and net interest income, the difference between what banks make on loans versus paying depositors, is surging. SoFi could grow into 2030 and beyond. There are 45 million people with student loans in America, and SoFi can still push further into other financial niches like real estate and business loans.
2. Affirm Holdings
Credit cards aren't evil, but they can harm your finances when misused. Unfortunately, too many consumers let their credit card balance get away from them. Total credit card debt in America exceeds $1 trillion, and interest rates are routinely over 20%. Digging out can be hard.
Affirm Holdings (AFRM +7.41%) is part of the Buy Now, Pay Later industry, which is seeking to replace credit cards. Buy Now, Pay Later companies originate small loans based on an individual transaction at a time. Sometimes they charge no interest, making money from the merchants instead.
NASDAQ: AFRM
Key Data Points
Buy Now, Pay Later aims to be a more transparent option to borrow instead of just racking up a balance that compounds on you. There are several Buy Now, Pay Later companies, but Affirm has vital relationships with retailers like Amazon, Walmart, and Target. In all, nearly 17 million people use Affirm at roughly 266,000 merchants. Affirm recently launched the Affirm Card, a payment card with Buy Now, Pay Later abilities, a hybrid product that has grown to nearly half a million users.
Affirm isn't profitable yet, but it believes it can achieve a five percent non-GAAP operating margin this year. Future earnings require more payment volume to improve profitability, and there will be opportunities to achieve that. Affirm's $21.4 billion in payment volume over the past year is a drop in the bucket of broader e-commerce and retail markets. Affirm will be going after the trillion-dollar credit card market for years, and investors should pay close attention to how it plays out. Look for Affirm's consumer-focused business model to produce excellent investment outcomes for patient shareholders.
3. Marqeta
New business models need new payment technology. Take DoorDash, for example. Dashers get a payment card to use at a restaurant when they pick up the meals they then deliver. But how does the company prevent drivers from paying for the wrong thing or adding extra food to the order?
This is where Marqeta (MQ +0.37%) changes the game. Its platform powers embedded payment technology. So that Dasher? Marqeta's technology will track that card, and only fund the card if the right purchase is made.
Think of Marqeta as the middle person, connecting new, innovative applications to existing payment networks. Marqeta designs solutions to help them work together. DoorDash is a Marqeta customer, along with several innovative companies, including Block (Cash App), Uber, and more. Marqeta charges a small fee for each transaction its technology powers.
NASDAQ: MQ
Key Data Points
Approximately $200 billion in payment volume has gone through Marqeta over the past year. There should be many growth opportunities over the next six years. With Marqeta, virtually any company can create and operate a payment card.
The business is on its way to turning a profit. It's done just over $7 million in free cash flow over the past year, and the company is sitting on $1.3 billion in cash with zero debt. For a stock with a market cap of just $3.2 billion, that's a war chest to invest in growth. Marqeta may be underrated today, but it might not last forever.
