3 Fintech stocks with companies that everyone can understand

Most investors have probably heard the term “fintech”, but they don’t necessarily know what it means. And even those who know what the word refers to may not fully understand what many fintech companies actually do – short for fintech.

If you’re one of that confused crowd, there’s good news. Not all fintech companies are too complex to understand. Here is a look at three publicly traded fintech companies that anyone can get a handle on and therefore be comfortable investing.

Image source: PayPal.

1. PayPal credit notes

PayPal funds (NASDAQ: PYPL) is arguably the original fintech company, formed before fintech even became a word. It started in 1998 as an organization called Confinity, but took on the nickname and premise we know as PayPal in 1999 when it allowed people to make and accept payments through e- mail.

eBay plugged into the PayPal platform in 2000, and by 2002 it had become the official digital payment intermediary of the online auction site. The rest, as they say, is history.

Many alternative payment platforms are now operating in this space, such as Square and Adyen, while more traditional players like MasterCard are making their way into PayPal’s digital payments field. PayPal also extends beyond simple payments, with options like coupon management and buy it now and pay later plans.

Its main activity is still the same as it started over two decades ago. It helps people make digital payments without using cash, credit cards, or money orders that eBay initially required to purchase goods from its website.

2. Successful holdings

Unlike PayPal, Holdings reached (NASDAQ: UPST) is not a household name. It’s also nowhere near as old or seasoned as PayPal, as it was founded in 2012.

However, he operates in a business as old as the Hills – the Loan. Simply put, Upstart has found a way to quantify credit risk for lenders that it says is better than the FICO scores that most of them currently use. It works with various credit institutions and determines the creditworthiness of lending clients for a fee.

Artificial intelligence (AI) is at the heart of Upstart’s approach to determining a person’s creditworthiness. Although the company’s algorithm is proprietary, its success rate is no secret.

Upstart Holdings says its approach is able to approve 27% more borrowers than the traditional approval approach, while defaults on loans it authorizes are 48% lower than what would be considered as a normal default rate. This is why more and more lenders are turning to the company to help them make loan decisions.

Upstart issued 362,780 loans in the third quarter of the year, up 244% year-over-year, lending (through its partner banking institutions) a total of $ 3.1 billion. dollars. Its fee income increased 250% over the three-month period, reaching a total of $ 228 million.

Will Upstart’s AI-based approval methodology ever replace the more traditional lending industry approach that still relies on credit scores provided by credit bureaus? Never say never, no matter how tall the challenge is.

Still, the fact that four of its lending partners dropped their FICO requirements last quarter and relied solely on Upstart data says a lot about how its platform does its job.

3. Global Coinbase

Finally add Global Coinbase (NASDAQ: COIN) to your list of fintech stocks that aren’t as complicated as you might think.

If you’re reading this, you’ve almost certainly heard of cryptocurrencies. You might not understand what they are, how they work, or why someone would want to speculate on them. But there’s no denying that they’ve captured the world’s attention for good ever since. Bitcoin started to soar in 2017, putting it and other cryptos on the map, so to speak.

As you will quickly learn if you want to try your hand at trading these digital currencies, you cannot simply log into your online brokerage account or call your broker to complete a trade. It requires a trading account specially designed for cryptocurrencies.

Enter Coinbase Global. It serves as an exchange for those looking to buy and sell crypto. But more than that, it offers a digital wallet for anyone who just wants to hold or spend their cryptocurrencies as they previously would with cash. The Coinbase wallet may also contain non-fungible tokens, or NFTs.

All of the services offered by Coinbase Global generate income in one way or another. The company posted sales of $ 1.2 billion in the third quarter alone, turning $ 406 million into net profit. Look for these numbers to continue to grow as the cryptocurrency deeper and deeper into the mainstream.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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