There is a $1.5t market opportunity for FinTech, according to Wells Fargo

By Puja Sharma

Over the last decade and a half, the digital revolution has changed the world, giving rise to new technologies, new ways of using technologies and bringing old businesses into the 21st century. As a result of bringing technology into the mix, banking and financial services have reaped incredible benefits – a development that has spawned a new term for it, FinTech.

The analyst at Wells Fargo predicts 6% annual growth in FinTech over the next decade after seeing $1.5t in global revenue potential– given current valuations, it is a great time for investors to take a fresh look at FinTech. The fundamentals of these companies are likely to improve in 22-23, and the group’s current discount to the broader market is not likely to be sustained.

Based on these factors, Jeff Cantwell, the analyst has identified two FinTech stocks that he believes are likely to flourish this year. And he’s not alone. According to TipRanks, both stocks hold a Strong Buy rating from the rest of Wall Street. Let’s examine them in detail:

Paymentus Holdings (PAY)

Paymentus is a bill payment FinTech company that offers cloud-based solutions as an omnichannel integrated payment platform. Through its product line, the company provides payment management technologies to more than 1,700 billers and financial institutions. Paymentus’ market is massive: in 2021, the company processed more than 280 million transactions.

Paymentus went public in May of last year, putting 10 million shares on the market for $21 each and raising more than $210 million in gross proceeds. The stock has tumbled ~42% thus far in 2022 and now trades slightly below its IPO price.

That loss came even as the company reported sound financial results. Paymentus released its first set of results for 2Q21 and showed $93.5m in revenue. That increased to $101.6m in 3Q21, and in the most recent quarter, 4Q21, it increased again to $108.1m.

However, For the full year of 2021, Paymentus brought in $395.5m in revenue, up ~31% from 2020. The company reported having $168.4m in cash on hand at the end of 2021. Cantwell sees a clear path forward for this company, for two reasons – the first is Paymentus’ quality, and the second is the known waste in its niche.

Global Payments (GPN)

The second Wells Fargo pick is another payment processor – but where Paymentus is focused on the North American market, Global Payments reaches worldwide. The company boasts 4 million customers in more than 100 countries; it provides seller services, offering payment technology to merchants to process credit cards, debit cards, digital payments, and even the new contactless payments. Global Payments handles more than 50 billion transactions every year.

In February of this year, Global Payments reported its Q4 and full-year results for 2021 and showed records on both counts. For the quarter, the company had $2.19b in revenues, up 13% year-over-year, along with diluted earnings of 72 cents per share, up 18% from the prior year’s fourth quarter.

According to the analyst, the company has obvious strengths – its global reach and its high revenue – and is expected to compound earnings per share dramatically over the next two years as it expands its leadership positions in both payments and software.