Financial technology (fintech) is a rapidly growing segment of the broader financial sector, and the revenue generated by companies in this space could be enormous. BCG estimates put the global fintech market at $1.5 trillion in sales by 2030.
This is just an estimate, of course, but it’s a good indicator of why companies are competing to be at the forefront of new fintech services. Two of these companies that are already well positioned to benefit as fintech grows are Sofi Technologies (NASDAQ:SOFI) and PayPal (NASDAQ: PYPL). Here’s why.
SoFi has expanded rapidly over the years, adding new financial services and offerings that now include loans, investments, checking and savings accounts, loan refinancing, credit cards, and even estate planning.
To put SoFi’s growth in perspective, consider that the company had more than 1 million members at the beginning of 2020. In December, it announced that it now has more than 10 million members: a 9-fold increase in membership in just five years.
SoFi’s strong member 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) increased 90% to $186.2 million.
SoFi stock has seen a huge surge over the past six months, rising 137% as of this writing. The earnings have pushed up the premium on SoFi stock, which now has a forward price-to-earnings (P/E) ratio of 74. That’s expensive by any standard, but starting a small position could be smart for investors long-term who want to own a part of a fintech leader.
Some investors may overlook PayPal when looking for fast-growing fintech companies, but this big fintech player likely still has more growth ahead of them. The company’s person-to-person payments app, Venmo, is a great example of how PayPal is willing to look for new areas of growth. Venmo is one of the leading payment apps, with approximately 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 per share. It also ended the quarter 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 a testament to PayPal’s leadership position in fintech. Its 9% increase in total payments volume in the third quarter, to $422.6 billion, shows that the company knows how to keep its users using its payment platforms.