Financial technology companies are among some of the most valuable for investors in stock exchanges across the world. This is predominantly due to the role these companies and the services they provide play in the modern world.
In this article, we’ll take a look at the recent financial performance of some of the leaders in this sector and any moves and shakes that have affected their value or growth trajectories.
Let’s start with one of the biggest; PayPal, which reportedly accounted for 59% of the global alternative payment methods market, one that is growing exponentially year-on-year.
PayPal Holdings Inc, as its stock exchange ticker reads, carries a market cap of $66.9 billion and by the end of 2022, had 435 million active accounts. That year the company also recorded $28.56 billion in sales and an operating margin of 16.68%; a very strong performance.
According to an investment note from Yahoo! Finance, the company’s 3-Year Revenue Growth Rate is 16.7%, which outperforms better than 73.29% of 498 companies in the Credit Services industry.
The company has taken on the opportunity to expand into other markets this year, too. In June, it was announced that the company was divesting $43 billion worth of its European buy now, pay later (BNPL) loans to investment firm KKR. PayPal itself, meanwhile, reported a 70% increase in BNPL volumes year over year, to $6 billion.
This deal, in essence, is all about shoring up a strong balance sheet and freeing up capital; becoming asset light while still earning and offloading the debt responsibility to KKR. PayPal shares were last up 1.7% following the news of the deal, which is expected to generate about $1.8 billion in gross proceeds.
Investors looking at PayPal may be more inclined to try their hand at a shiny, newer model within the alternative payment methods market. However, PayPal remains a solid opportunity despite the obvious fact that in all likelihood, its boom growth days are behind it.
Next, let’s look at Square, or Block as it was rebranded to.
This year has seen a share price upwards surge for many technology stocks. ChatGPT, Bard and other artificial intelligence players have been a large part of this but on the financial services side, Square has been largely left outside the party.
The general trend of technology stocks has been upwards to the tune of some 32% on the Nasdaq, while Square, disappointingly, has sunk lower by around 15% in 2023.
Square at its core aims to provide a similar mission statement to PayPal; provide for both merchants and buyers to create one big, happy payments ecosystem.
It has notably struggled to retain the growth of its once-darling platform, Cash App, which has seen a sizeable slowdown in growth that could continue into next year.
The platform helps individuals manage money as well as buy stocks and cryptocurrency. From a person-to-person money transfer service, it competes largely with PayPal’s Venmo, Zelle and others.
Its explosive growth trajectory began, as with many of the bullish technologies in recent years, during the coronavirus pandemic when traditional banks missed a step in terms of offering consumers fast and flexible money movements. Reports are that the Cash App is struggling to retain its consumer growth numbers and even having a hard time holding on to existing users in the face of ever-stiffening competition.
But the other, much more indicative side of the business came in 2021, when the company rebranded to Block. The move was a statement of intent towards the company’s commitment to blockchain technology, which underpins cryptocurrencies. Since the November 2021 bitcoin high of around $68,000, the sector has err, struggled.
Not for Block’s lack of trying, though. They’ve invested in building infrastructure that enables bitcoin-based commerce on its merchant platform as well as creating an entirely new business line to help developers build financial services products focused around Bitcoin.
It’s not the only department within the company struggling.
Having bought Australian buy-now-pay-later (BNPL) platform Afterpay in early 2022, the platform’s growth has slowed significantly due, in part, to the acquisition itself.. Even before the deal, according to Investors.com, the BNPL platform was originally valued at $29 billion, halving to less than $15 billion by the time the deal closed.
Square stock plunged about 61% last year and despite some promising userbase growth in some business aspects this year, it is likely to remain in a fight with competitors that will negate potential gains.
Things are not *entirely* rosy at PayPal right now either.
On 27th September 2023, the company will enter a new era as a new CEO takes the helm.
Alex Chriss, who has recently led the QuickBooks division of US-based software company, Intuit, will replace incumbent Dan Schulman.
Chriss joins the payment provider shortly after a circa 2,000 employees lay-off bonanza back in April and a 16% year-on-year stock plummet.
Chriss’ expertise in the small business sector is what attracted PayPal as it too eyes the world of crypto.
Last year, the platform opened the ability for users to receive and send several popular crypto tokens including bitcoin and ether.
More recently, the company announced its own US dollar-backed stablecoin called PayPal USD, allowing people to make person-to-person payments and transfer the currency between PayPal and other outside wallets. PYUSD lives on the Ethereum blockchain and is issued by Paxos Trust Company, a financial tech company specialising in blockchain.
Just as the stablecoin went to market, so too did a new PayPal Cryptocurrencies Hub, allowing users to manage their crypto not unlike a private bank, but one where they have more autonomy over the movement of their money and use it for anything from peer-to-peer transactions to using PayPal at online casinos.
It’s not hyperbolic to say that the online payments space is crowded like nothing we’ve seen before. Market leaders are still betting big on crypto, which may come back to bite hard and product and service innovation is proving harder to come by.
Time will tell who is next to take and keep the top spot because right now, everyone’s waiting for the next big breakthrough in a time when they are hard to come by.