Competition is fierce in the financial technology (fintech) space, with many nontraditional companies in the financial space vying for a slice of the fintech pie. At stake is a $1.5 trillion market (by 2030) spanning digital payments, online banking, payments services, and more.
Amid the rising competition are two companies that stand out as leaders in their respective markets: SoFi Technologies (SOFI -0.24%) and Visa (V 1.93%). Here's why these companies could potentially be solid long-term performers for investors who buy now and go the distance.
1. SoFi's one-stop financial shop
SoFi has built itself into a financial juggernaut by offering its members a variety of financial services to fit their needs. From student loan refinancing to mortgages, and investment accounts to savings accounts, members often sign up for one service and continue to add more over time.
For example, the company's annualized revenue per product rose 52% to $98 in Q2. Membership has risen steadily as well, climbing 34% in the quarter to 11.7 million. That growth has fueled SoFi's top and bottom lines, with sales surging 44% in Q2 to $858 million and non-GAAP earnings rising 700% to $0.08 per share.
There are some indications that new growth opportunities could be on the horizon as well. The Trump administration is reportedly considering moving away from student lending, or perhaps selling some of the current loans on the private market. If that happens, SoFi's management believes it could benefit immensely, and could be "a double bottom line from the standpoint that it's a revenue stream [on] day one, but it's also a member that becomes part of the ecosystem of SoFi." While nothing is certain in this area, it shows that the company could ramp up potentially new revenue streams in the coming years.
2. Visa is an innovative financial juggernaut
Visa, the credit card payment processor, has adapted with the times by offering more services to customers and merchants. The result is that Visa continues to command a lead in the payment space, with an estimated 50% of credit card payments in the U.S. and about 37% globally.
Visa's sales grew at a healthy clip of 14% in Q3 to $10.2 billion, and its non-GAAP earnings per share jumped 23% to $2.98. Visa's payment volume -- how much customers spend through its processing system -- also rose by 8%.
There's likely more room for Visa to expand its business as well. The company is tapping into a global payments market that will be worth an estimated $290 trillion by 2030. As more customers choose digital payments over cash, Visa's payment processing dominance gives it a massive advantage over its competitors -- likely for years to come.
One factor fintech investors should keep an eye on
Financial services companies rely on a strong economy for much of their growth. And for now, the economy is still doing relatively well.
But there are some signs that the tide may be shifting. ADP data reported job losses for both August and September that were higher than economists estimated. Tariff uncertainty continues to weigh on some industries, and a recent University of Michigan Surveys of Consumers found that consumers' assessment of their five-year financial outlook is at a decade low.
Any significant slowdown or recession would likely slow some of the good times. It's not a reason not to buy these stocks, but you should be aware of the economy's effect on their businesses. Still, over the long term, SoFi and Visa shouldn't have a problem riding out any temporary economic slump and being great additions to your portfolio.
