Thanks to the ever growing pool of money being managed in superannuation and the increasing number of self managed super funds (SMSFs) each year, the financial technology or ‘fintech’ sector is expected to be one of the fastest-growing sectors of the economy over the next decade or so.
Many of the companies operating in the sector are aiming to utilise their technology in an effort to ‘disrupt’ traditional money managers and take business away from financial institutions like the big four banks.
Although the sector is highly competitive, the ASX has a number of exciting fintech shares that investors should take note of.
Class Ltd (ASX: CL1)
Class has a market capitalisation of $367 million and specialises in providing a cloud-based platform for SMSF portfolio administration. As the chart below highlights, the company is enjoying positive momentum when it comes to winning new portfolios and now commands an impressive market share of around 20%.
Praemium Ltd (ASX: PPS)
Praemium has a market capitalisation of $178 million and operates primarily in the portfolio management and financial advice segments. The company has enjoyed particularly strong growth in funds under administration (FUA) over the past 12 months and now has in excess of $5 billion under administration. Praemium also has exposure to the much larger UK market and the signs so far have been promising. The two charts below provide a good indication of the momentum the company is currently enjoying.
Hub24 Ltd (ASX: HUB)
Hub24 has a market capitalisation of $274 million and provides an integrated managed portfolio platform that allows users to gain exposure to managed funds, term deposits, insurance, shares and exchange traded funds (ETFs) in the one account. After quickly building scale on the back of a strong surge in new client wins and FUA (highlighted below), the company is now on verge of becoming profitable. Interestingly, Hub24 is now preparing to launch the ability to invest in individual international shares which could be a major selling point for advisers and investors alike.
The three fintech shares highlighted above are certainly on their way to becoming much larger companies over the next few years, but they are not without their risks especially at current valuations. Investors who are interested in the sector, but want lower levels of risk, might like to consider shares like Iress Ltd (ASX: IRE) or Link Administration Holdings Ltd (ASX: LNK).
Motley Fool contributor Christopher Georges has no position in any stocks mentioned. The Motley Fool Australia owns shares of Class Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.