While there are thousands of Fintech companies globally, not all of them are created equal. It’s important to focus on Fintech companies that possess a mix of useful innovation, profitability and growth qualities. The shortlist below consists of companies offering low-cost digital services, including payments, debit and credit cards, loan automation, money transfer, digital brokers, e-wallets, and buy-now-pay-later providers.
Higher reach, lower cost of service, better visibility of KPIs, convenience, customer satisfaction, etc. These are just some of the benefits that FinTech companies are striving for when developing new products and disrupting existing infrastructure.
These companies aim to remove unnecessary friction between clients and their services, while cutting costs in the process. They exploit the decreasing cost of technology, higher global connectivity, and the bureaucratization of large traditional corporations, allowing them to build superior products that can scale up quickly.
The segment carries with it some risks: while traditional tech inefficiencies continue to be disrupted, the largest challenge for FinTech companies is regulatory compliance rather than efficient systems, where the older institutions have the advantage. Scaling up fast also means quickly reaching the target market, which can be very expensive and sometimes result in a user base that companies find hard to manage. First movers also have trade-offs, as they are effectively the first to test new services and can only learn from their own mistakes, allowing competitors to jump-in later and copy what works, and avoid the expensive mistakes of what didn’t.
That being said, there is a large payoff for getting a business right, and most of the traditional institutions are unable to move fast enough to adapt to new technology.
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Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned.