S&P Global Market Intelligence’s 2024 Trends in Fintech highlighted 10 trends for this year, which will culminate in the industry’s return to a more normal business environment. While it doesn’t provide fintech stocks to buy, it does provide hints on where to look in 2024. The report’s executive summary stated:
“With the ‘fast growth fueled by cheap capital’ era of fintech now firmly in the rearview mirror, 2023 has been marked by rightsizing and a recommitment to business fundamentals across the sector. With capital in shorter supply, the line between fintechs that have found product-market fit and those that have not is clearer than ever before.”
So, who are these fintechs that have found product-market fit? I’ll consider companies participating in and benefiting from three of the 10 trends covered by S&P Global Market Intelligence.
Here are my three fintech stocks to buy for 2024 and beyond.
SoFi (SOFI)
SoFi (NASDAQ:SOFI) stock has gotten hammered in 2024, down over 29% year-to-date. It trades within 50 cents of a 52-week low.
Of the 10 trends covered in the above-mentioned report, the second pertains to banking as a service (BaaS). The S&P Global Market Intelligence report stated:
“While we are believers in the long-term potential of banking as a service (BaaS), current market conditions could impede the growth prospects of numerous startups in this highly saturated segment.”
While investors tend to think about SoFi’s student, personal and home loan lending platform, the company also has a tech business, Galileo Technologies, which helps financial services companies create new products more quickly and effectively. Seth McGuire, Chief Revenue Officer at Galileo, said:
“As a leading enabler of BaaS and embedded finance, Galileo, and companies like Central Payments, are transforming the way financial services are delivered. Our API-forward approach and scalable, extensible platform enables innovative brands to build the next generation of financial products to meet customers at their point of need.”
SoFi’s tech platform generated 151 million accounts in Q1 2024, 20% higher than a year earlier. That translated into $94.4 million in revenue, 21% higher than a year earlier, while its contribution profit was $30.7 million, 107% higher than Q1.
It will become a more important part of SoFi’s overall business in the quarters ahead, bolstering SoFi’s presence as one of the fintech stocks to buy.
Mastercard (MA)
Mastercard (NYSE:MA) and Visa (NYSE:V), its largest rival, have stock returns attached at the hip. In 2024, MA stock is up over 5%, 72 basis points higher. Over the past year, it’s up nearly 20%, 53 basis points higher. Lastly, over the past five years, it’s up over 66%, 889 basis points higher than Visa.
That’s the good news. The bad news is that both payment processors have underperformed the S&P 500.
Of the 10 trends from the report, Mastercard is using generative AI to detect fraudulent use of bank cards. Mastercard’s May 22 press release stated:
“The new technology works by scanning transaction data across billions of cards and millions of merchants at faster rates than previously imaginable. In doing so it alerts Mastercard to new, complex fraud patterns. Using generative AI-based predictive technology built by Mastercard it is able to protect future transactions against emerging threats.”
Thanks to the new technology, it can detect comprised cards twice as fast as in the past. That’s great news if you have a Mastercard-branded bank card.
Mastercard’s operating margin in Q1 2024 was 56.8%, 220 basis points higher than a year earlier. It’s got plenty of free cash flow to pay for new technology development — $10.62 billion in the trailing 12 months — to keep shareholders confident about their long-term investments.
Cannae (CNNE)
Cannae (NYSE:CNNE) is the least fintech-related of the three stocks. However, because the company has underperformed over the past five years, it makes a good under-the-radar, sum-of-the-parts play.
The company is led by William Foley II — amongst his many jobs, he is the Chairman of the Foley Entertainment Group, which owns the NHL’s Vegas Golden Knights — who stepped back into the role of CEO in February to try to reverse the losses the holding company generated in 2023. The former CEO, Richard Massie, is now Vice Chairman. He will help Foley look for new investment opportunities.
Cannae was spun off in 2017 from Fidelity National Financial Ventures, a tracking stock of Fidelity National Financial (NYSE:FNF), another Foley-founded company, where he is Non-Executive Chairman and owns 3.4% of the stock.
One of the companies owned by Cannae is Computer Services, a business that delivers fintech, regtech and cybersecurity solutions to financial institutions and corporate customers, both foreign and domestic. As S&P Global Market Intelligence’s 8th trend states, “Regtech will have its moment” in 2024. Cannae’s 6.4% interest in CSI was worth $88 million as of March 31.
Its biggest investment is a 15.6% stake in Dun & Bradstreet Holdings (NYSE:DUNB), valued at $705 million at the end of March, down from $828 million at the end of December. D&B is working with IBM (NYSE:IBM) to drive other organizations’ adoption of generative AI.
As of May 31, its net asset value (NAV) per share of $32.83. It trades at a 45% discount to its NAV.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
