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Fintech disruptor will benefit from Banking Royal Commission

The US market has big name companies like LendingClub and Prosper (not to be confused with the soon to be listed Australian small business online lender, Prospa) but Australia’s technology stocks are much more modest with lower profiles. A couple of Australian fintechs are starting to look interesting and should be on your watchlist.

Zip Co Ltd (ASX: Z1P) provides online credit for consumers and businesses at point-of-sale through brands zipMoney and zipPay. Some of the merchants on the platform include TigerAir, Noni B Limited (ASX: NBL), Laser Clinics Australia and MyDeal. Zip also owns Pocketbook, a free money management app. The share price is up 15% in a year.

Afterpay Touch Group Ltd (ASX: APT) provides a platform that allows retail merchants to offer consumers to ‘buy now, receive now, pay later’ without having to enter into a traditional loan agreement. The US market launch through one of the largest lifestyle fashion retailers, Urban Outfitters, has been taken favourably by the market. There is a risk with a price-earnings-ratio of 142x and share price performance of 165% in a year, but the concept is exciting.

Money3 Corporation Limited (ASX: MNY) started out as a a payday lender, which it plans to exit in the next financial year. The company is predominantly involved in providing secured auto loans, which make up around 80% of its loan book. As it leaves behind short term unsecured payday loans, its funding costs are likely to fall, which will also benefit the bottom line as well as the growth in auto loans. The risks are that lending to borrowers who may not be able to get a loan elsewhere, increases the chances of loans defaulting. Not strictly a fintech but the company does offer online loans. Trading on a PER of 10x as well as paying a 4% annual dividend yield.

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Motley Fool contributor Rosemary Steinfort has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 Scott Phillips.

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