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5 Companies to Watch as Tech Takes Aim at the Finance Industry

PYPL, T.SHOP, BABA, CSCO

FN Media Group Presents SafeHaven.com Market Commentary

PR Newswire

LONDON, June 19, 2018 /PRNewswire/ --

Digital currencies are the hot topic of the day, but they have yet to prove their staying power. Meanwhile, innovation in financial services and mobile banking is proceeding at a searing pace, even if the massive change and upheaval unfolds beneath the headlines. Mentioned later in this commentary includes: Paypal (NASDAQ: PYPL), Shopify Inc (NYSE: SHOP), Alibaba (NYSE: BABA), Mastercard (NYSE:MA), Cisco Systems (NASDAQ: CSCO).

The $8.5 trillion U.S. financial services industry is going through a dramatic transformation, with incumbents fending off upstart fintech companies that promise to disrupt their old ways of doing business.

There will be a lot of blood left on the trading floor, with the winners enjoying all the spoils. Either way the consumer benefits. In the next few years, change is coming to the way consumers borrow, save, invest, pay bills and make purchases.

Here are 5 companies focusing on financial technology that could see their share price soar in the coming years:

#1 Paypal (NASDAQ: PYPL)

Paypal has been around for quite a while and helped engineer the previous revolution in banking, secure online transactions, and peer-to-peer money transfers. It may be an old name at this point, but Paypal continues to innovate and offer new services to businesses and consumers.

Paypal is a leader in this space and is growing quickly. PayPal processed approximately $49 billion in mobile payment volume in the first quarter, which is up 52 percent from a year earlier. Mobile payments actually account for 37 percent of Paypal's entire payment volume. "Mobile is becoming the defining force in digital payments. It is rapidly blurring the distinction between online and offline and accelerating the adoption of digital payments," Paypal CEO Dan Schulman said last year.

Paypal offers its One Touch platform, which allows users to register a mobile device that can be used to quickly make payments at any merchant that accepts it, with a single click. Paypal ended the first quarter of 2018 with 92 million consumers using One Touch, and 8.6 million merchants.

The market for mobile payments is skyrocketing. Between 2015 and 2020, U.S. mobile payments will quintuple, soaring from $550 billion to $2.8 trillion, which represents a compound annual growth rate (CAGR) of 39.1 percent. Mobile point-of-sale payments accounts for a huge chunk of that, but the market also includes online crowdfunding, peer-to-peer lending, robo-advisors and automated wealth management services.

#2 QPAGOS ( QPAG )

One of the most exciting innovations is occurring in markets where people still use a lot of cash. A lot of developing countries still rely heavily on cash economies, with the underserved and underbanked having few high-tech options for their financial needs. Legions of workers line up at banks or other payday lending companies to cash checks, wire money, or pay bills. It's inefficient, and people are gouged by fees.

QPAGOS (QPAG) is upending this dynamic industry, with what some like to call small "super-banks" deposited on street corners, in supermarkets, or an endless number of other convenient locations. These are self-service machines that allow people to quickly pay bills with cash, send money, or top up pre-paid cell phones.

The idea is pretty simple. QPAGOS is working with many major utilities, banks, cell companies and other third parties, which will allow individual consumers to go up to a "super-bank" on the street and use cash to seamlessly pay any one of a long line of personal bills. Just realized it was the due date for that electric bill? Run to the QPAGOS super-bank on the street corner and pay it with cash in an instant.

And while most people in the U.S. would not think twice about sending money to a friend using Paypal or Venmo, such a transaction is much trickier for those without banking or internet access. The super-banks run by QPAGOS ( QPAG ) allows people to immediately wire cash to friends and family.

In Mexico, nearly 60 percent of adults are unbanked, which means the market potential is massive - some 36 million people are in need of basic financial services. Also, about 80 percent of retail transactions are conducted in cash. In total, about 50 percent of consumer spending in Mexico is done in cash.

Let's take mobile phones as an example. There are around 107 million mobile subscribers in Mexico, but 85 percent of those are done on prepaid plans for a variety reasons. They either don't have a bank account, don't have internet access, or simply depend on intermittent cash payments for their income. As a result, users have to routinely top up credit on those pre-paid phones - about $12 billion in top-up transactions occurred in 2014. Up until now, they have to stand in line at convenience stores, buy little charge cards, and manually top up the phone. QPAGOS' super-banks allow them to do all of this in an instant.

The super-banks collect fixed fees for transactions to over 140 mainstream providers, and they also collect advertisement revenue both on the physical displays of the machines and while consumers interact with the interface. Retail outlets lease the QPAGOS super-banks - another revenue stream - which can boost foot traffic.

QPAGOS targeted countries that have high cash usage at first. In Mexico, for instance, there are about 500 million electronic payments done each month, a market that QPAGOS is starting to crack with its super-banks.

The potential is enormous. In Mexico, QPAGOS estimates there are around 49,000 potential locations in retail - convenience stores, supermarkets and pharmacies, for example. It estimates 80,000 addressable locations in financial institutions, such as banks and ATMs, plus another 85,000 potential "mom & pop" locations representing just 10 percent of the 850,000 family-owned bodegas.

QPAGOS is now expanding north of the border, recently announcing the acquisition of 1,000 self-service "super-banks" in California . The market for remittances from the U.S. to Latin America is around $60 billion per year, and nearly a third of that is located in California. And remittances from the U.S. to Mexico alone is valued at about $28 billion per year.

The market is ripe for new entrants, and QPAGOS is seeking to tap a lot of low-hanging fruit. The super-banks that QPAGOS will set up in California will make money transfers to friends and family faster, cheaper and easier. QPAGOS will seek to make Western Union and other money wiring services obsolete for these users.

Finally, QPAGOS has another ace up its sleeve: Its "super-banks" can conduct transactions for cryptocurrencies. If someone wants to buy Bitcoin, they can do so at one of the self-service super-bank locations on the street corner.

QPAGOS is small company, but it is growing at a blistering rate. In the first quarter, it earned $1.4 million in revenue, which was a 58 percent increase from a year earlier. The sky is the limit.

#3 Shopify Inc (NYSE: SHOP)

Shopify is one of Canada's most promising e-commerce companies. More than 500,000 companies rely on Shopify's real-time e-commerce solutions, including Tesla, Budweiser, Red Bull, among many others.

The death knell for retail has proven to be an opportunity for companies like Shopify and the company has taken full advantage of this. Shopify makes purchasing goods and services easy for anyone - and in a time where convenience is king, Shopify has made the right steps at the right time.

Next to offering practical solutions to small and mid-sized business, it helps artists such as Drake, Kanye West and Kylie Jenner to sell their products to a big audience. But perhaps one of its most successful recent deals is its integration with Amazon that allows merchants to sell directly on Amazon through their Shopify stores.

Shopify effectively cuts out the middle man in the sales process and offers its clients to sell their products directly through one single interface, optimizing the sales experience for both vendor and buyer.

In addition to its revolutionary approach on e-commerce, Shopify is also delving into blockchain technology, making it a promising pick for investors, especially given that the sector is red hot right now.

#4 Alibaba (NYSE: BABA)

Alibaba is quickly becoming one of the world's hottest companies thanks to its innovative approach to technology. It offers investors the full package; exposure to the rapidly developing fintech universe, cloud computing and AI space, and e-commerce and retail.

One of Alibaba's most revolutionary products, however, is AliPay, the third-party mobile payment application that has enjoyed widespread adoption throughout China.

The mobile payment app brings an entire payment ecosystem together in one easy to use solution. Need to catch a train? No problem, just scan a QR code. Want to send money to a friend? Just locate their account and press send. Craving a bubble tea? Customers can order ahead, skip the line, and pick up their beverage without even touching cash or a card.

From its Initial Public Offering until now, Alibaba has received nothing but positive investor attention, and with its continuing commitment to adopting the newest and most cutting-edge technological breakthroughs, this trend is likely to continue.


# 5 Mastercard (NYSE: MA)

As increasingly dynamic and aggressive fintech startups enter the finance space, the giants of the industry are being forced to innovate like never before in order to stay on top. F

On the blockchain front, Mastercard is currently testing a platform for business-to-business payments, aimed at tackling efficiency, transparency and speed of transactions. Ajay Banga, CEO of Mastercard, claims that tacking business-to-business payments in this manner is "more interesting than trying to find technology looking for a problem to solve in consumer payments".

In the personal banking sector, Mastercard is also making significant steps. It recently has partnered with Diebold Nixdorf to launch two new projects aimed at bringing cash to those who need it. The first, Mastercard Cash Pick-Up, allows banks to deliver cash more quickly and securely to authenticated consumers, regardless of whether they are banked or unbanked.

Mastercard's forward-looking and innovative strategy has rewarded investors, with the stock having already seen a 33 percent gain this year alone. While there are many fintech startups that could provide investors with higher rewards - investors with a taste for lower risk would do well to look at this finance juggernaut.

Other companies inventors are paying close attention to as fintech disrupts the world:

Cisco Systems (NASDAQ: CSCO) is preparing to make the transition from hardware to software. For years, Cisco sold the hardware needed to build and maintain telecommunications networks and now, with much of the industry operating on cloud-based networks, Cisco is joining the race.

By. Meredith Taylor

IMPORTANT NOTICE AND DISCLAIMER

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