Fintech is a portmanteau of the words finance and technology. A fintech is just a business that helps bring better technology to financial services. The ATM is a historical example; smartphone apps are a current example. In so doing, fintech makes banking, insurance, and wealth management cheaper and more efficient. But what are some fintech companies?
The companies listed below are all found in the ETFS Fintech & Blockchain ETF (Exchange Code: FTEC).
PayPal has been one of the biggest winners of online shopping. The company started out (with Elon Musk) helping consumers buy and sell on eBay but has since grown and now offers many products under sub-brands. These products include Venmo, which allows friends and family to transfer cash between each other, Honey, which is one of the largest coupon websites connecting businesses to consumers, and Braintree, who helps companies with their ecommerce setup. These diverse sub-brands enable PayPal to become something of a fintech super app. It now has more than 392 million users as of 31 March 2021, data from their quarterly reports indicates.
Coinbase is arguably a household name in the cryptocurrency market. It is most famous for running the biggest platform for trading cryptocurrencies, and provides something like an exchange for people to buy and sell bitcoin, Ethereum, Solana and the like, but Coinbase is increasingly branching out and offering other services, such as custody. This is where Coinbase holds and stores cryptos on behalf of investors -quite like a custody bank.
Square became famous in Australia recently thanks to its purchase of Afterpay. The company, run by Twitter boss Jack Dorsey (CEO of both companies), built the Square card reader, which is essentially a smaller faster EFTPOS machine. Square gives its card readers away for free to businesses, which has allowed it to build a huge network of small business users. It then takes fees from payments that go through its machine. In recent years, Square has also been building more software and other products (like loans) for businesses that use its app. It also runs the Cash App, which competes with Venmo.
Mortgages are a lot of work – for both the banks that lend the money and the households that repay it. For banks and brokers, mortgages require credit checks, property valuations, compliance, monitoring—all of which are time consuming and when done manually are prone to human error. Black Knight’s software and data do a lot of this work for the banks and mortgage brokers. In so doing, it makes writing mortgages easier and removes a lot of human error in the process.
The New Zealand business – based in Australia – is a world leader in cloud accounting. It allows small businesses to connect to their accountant in real-time via a single ledger—called the ledger of truth. This then lets businesses see things like their free cash flow and revenue, without needing to book meetings with their accountant. This ledger can also connect with bank data so that there could be bank reconciliation of accounts. Xero runs a subscription model and has been making inroads into Europe, especially the UK.