Financial technology (fintech) is a rapidly growing part of the wider financial sector, and the revenue generated by companies in this area could be huge. Estimates from BCG put the global fintech market at $1.5 trillion in sales by 2030.
That's just an estimate, of course, but it's a good indicator of why companies are competing to be at the forefront of new areas. fintech services. There are two such companies that are already well positioned to benefit as fintech grows Sofi Technologies (NASDAQ: SOFI) a PayPal (NASDAQ: PYPL). Here's why.
SoFi has expanded rapidly over the years, adding new services and financial offerings that now include loans, investing, checking and savings accounts, loan refinancing, credit cards, and even estate planning.
To put SoFi's growth in perspective, consider that the company had over 1 million members at the start of 2020. In December, it announced that it now has more than 10 million members — a 9x increase in membership in just five years.
SoFi's strong membership base has translated into impressive financial results. The company increased sales by 30% in the third quarter of 2024 to $697 million, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 90% to $186.2 million.
SoFi stock has been on a huge run over the past six months, rising 137% as of this writing. The earnings have increased the premium for SoFi shares, which now have a forward price-to-earnings (P/E) ratio of 74. That's expensive by any measure, but starting a small position could be smart for long-term investors who want. to own a piece of a fintech leader.
Some investors may overlook PayPal when looking for fast-growing fintech companies, but this major fintech player likely still has more growth. The company's person-to-person payment app, Venmo, is a prime example of how PayPal is willing to look to new areas for growth. Venmo is one of the leading payment apps, with an estimated 88 million users, up from 52 million in 2020.
PayPal's revenue rose 6% in the third quarter of 2024 to $7.8 billion, and its non-GAAP earnings rose 22% to $1.20 a share. The quarter also ended with $1.4 billion in free cash flow and $16.2 billion in cash and cash equivalents.
The company's 432 million global users are testament to PayPal's leading position in fintech. Its 9% increase in total payments in Q3, to $422.6 billion, proves that the company knows how to get its users to continue using its payment platforms.