Traditional bank stocks are often considered slow-growth investments that are held for income and stability instead of big long-term gains. Therefore, investors looking for a bit more growth in the financial sector should focus on fintech companies, which blend together the stickiness of financial services with the scalability of cloud-based tech platforms.
However, the fintech market is still a fragmented one that is filled with unprofitable companies with narrow moats and murky plans for the future. To cut through that noise, let's examine two disruptive fintech companies with a lot more growth potential than their speculative peers: Chime (CHYM -0.09%) and Nu Holdings (NU -0.23%). Let's see why these two high-growth fintech stocks could churn a modest $2,000 investment into a lot more cash over the next few decades.
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Chime
Chime runs a fintech app for mobile banking services. It provides access to free checking and savings accounts with overdraft protection and early pay features. It also offers a Visa (V 0.16%) debit card with fee-free access to over 50,000 ATMs in the U.S., as well as a credit card for customers with lower credit scores.
Chime isn't a bank. It tethers its users to two FDIC-insured partner banks -- The Bancorp Bank and Stride Bank -- which actually hold and manage those accounts. It generates most of its revenue by taking a cut of the swipe fees that Visa charges merchants for processing its debit and credit cards. A smaller percentage of its revenue comes from the incentives it earns from The Bancorp Bank and Stride Bank for bringing in new deposits.
Chime mainly serves lower-income customers who don't have enough assets to sign up for fee-free checking and savings accounts at larger banks. Its interest-free early pay features are also useful for people who live paycheck to paycheck. That strategy is helping Chime carve out a high-growth niche in the crowded fintech market.
In 2024, its revenue rose 31% and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) nearly broke even. Its number of active members grew 25% to 6.6 million as its average revenue per active member (ARPAM) improved from $210 to $212. In the first quarter, its revenue rose 32% year over year, its adjusted EBITDA margin turned positive, its active members jumped 23% to 8.6 million, and its ARPAM grew 9% to $251.
From 2025 to 2027, analysts expect its revenue and adjusted EBITDA to grow at a CAGR of 19% and 175%, respectively. With an enterprise value of $10.6 billion, it still looks reasonably valued at 45 times next year's adjusted EBITDA -- especially if you think it can keep attracting more unbanked individuals as it expands its ecosystem.
Nu Holdings
Nu's Nubank is the largest digital bank in Latin America. It's based in Brazil, but it also operates in Mexico and Colombia. Without any brick-and-mortar branches, it expanded at a much faster rate than the region's traditional banks. It also increased the stickiness of its ecosystem with credit cards, e-commerce services, and cryptocurrency trading tools.
About a fifth of Latin America's adult population was still unbanked in 2023, according to Mastercard's estimates, so NuBank still has plenty of room to keep growing.
From 2021 to 2024, its number of year-end customers more than tripled from 33.3 million to 114.2 million, its monthly activity rate (its active customers divided by customers) increased from 71% to 83%, and its average revenue per active customer (ARPAC) more than doubled from $4.50 to $10.70. Its average cost for serving each active customer also held steady -- so it didn't sacrifice its margins to aggressively expand. Its rapid growth and firm financial discipline helped it stay profitable over the past two years.
In the first quarter of 2025, Nu's customer base grew 19% year over year to 118.6 million, its activity rate held steady at 83%, and its ARPAC rose 17% year over year to $11.20. From 2024 to 2027, analysts expect its revenue and net income to grow at a CAGR of 28% and 37%, respectively, as it stays on top of the Latin American market.
Nu's stock still looks like a bargain at 18 times next year's earnings, presumably because the political unrest and inflation are driving many investors away from Latin American stocks. But if you expect those headwinds to eventually dissipate, it could be a great time to invest in Nu's undervalued stock.
