The emergence of Financial Technology (FinTech) companies has not gone unnoticed. Many new providers are entering the stage, with the traditional FinTech companies being disrupted.
A good example is the rise of new payment providers that are starting to overshadow the traditional FinTech companies like PayPal. With more innovations happening in the space, there is also more potential for investments. With huge upsides and an addressable market, it is a space worth exploring as an investor. In this article, we will look at the market and see why a stocks tracker can help you make better FinTech investment decisions.
FinTech is all about the markets they serve
When it comes to determining the value of FinTech companies, understanding their markets is key. For example, payment providers can offer a broad range of services to their clients. Since all companies require transactions, their addressable market has a huge potential. We also observe that their EBIT margins are huge compared to traditional banks. This has to do with the use of technology that makes it easier to conduct the transactions and do KYC. Through this combination, the margin is often near the 50 percent range whereas traditional banks often are below 10 percent.
What does this mean for an investor?
The components of the Total Addressable Market (TAM) and the high EBIT margin prove that the market is of high interest to investors. With a huge growth potential, it is relevant to start investing in the FinTech domain. You can realize a high alpha and grow your portfolio with these innovative companies. Good examples of leading FinTech companies are Adyen, Stripe, and Mollie. These companies are having a steep growth trajectory with new services being released every quarter.
What can a stocks tracker offer you?
There are many potential options in which a stocks tracker can support your investments. For example, you can follow stocks that you are interested in to see what is happening in the market. This means that you get notifications on news, company information, and earning reports published. This allows you to get a holistic view of the company, which in turn helps to make a better investment decision.
An interesting example: Delta.app.
A good example of such an application is the Delta.app. This provider is not only looking at traditional stocks but also takes into account the crypto market. This allows you to have a holistic view of your portfolio.
You can also create buckets of investments. For example, you can split your watchlist with the stocks you own, or you can create a division between growth and dividend stocks. By creating these buckets, you can measure the performance. In this context, it makes sense to create a separate bucket for FinTech stocks. This allows you to track the performance difference between your FinTech and index funds. In the end, it is all about realizing an alpha. If not possible, you should switch to other (FinTech) stocks to make it happen or focus on index funds.