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Why these 3 fintech growth stocks are on my watch list

As people and companies worldwide rely less and less on cash, they look for the payment solutions that better suit their needs.

Here are three ASX-listed companies that provide payment services:

Afterpay Touch Group Ltd (ASX: APT)

Afterpay offers something in between a credit facility and a payment service: the possibility of postponing small purchases by dividing them in four fortnightly instalments. The idea proved to be extremely successful, particularly with millennials, underpinning an outstanding share price run.

After a temporary setback, due to concerns that the business had peaked and was about to come under regulatory scrutiny, the stock resumed its upwards trend. Recently, Afterpay began operations in the USA, securing plenty of room for growth in that multi-billion dollar retail sales market. On Thursday, Afterpay was 0.5% up to $8.19.

EML Payments Ltd (ASX: EML)

Shares in EML climbed 4% higher to $1.28, after the company announced the launch of its Total Rewards Payments Card in the Caesars Palace Casino of Las Vegas. The card can be used to make purchases and earn points that can be later redeemed at the casino. This single deal may not be a game changer, but it gives a good example of EML’s creativity in designing payment solutions for a variety of business needs, including paying suppliers, paying employees, and providing customers with reward programs and gift cards.

Xero Limited (ASX: XRO)

Xero’s accounting software provides small and medium enterprises with a range of tools to organise payments to employees and suppliers – for instance scheduling future payments, setting up recurring bills, and batching transactions. The platform keeps a paperless archive of all operations. Furthermore, a few months ago National Australia Bank Ltd (ASX: NAB) said it would allow its customers to make payments directly through Xero, without the need of importing payment information manually into the bank’s software. On Thursday, Xero was 1% up to $44.01.

Consumers and businesses will always need effective payment solutions, and companies that can provide them will never lack a customer base. While I think EML’s product range is broad but quite traditional, both Xero and Afterpay offer innovative services and have a great potential for growth, with Afterpay more exposed to regulatory risk, given the proximity of its business model to one of a lender.

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO, Emerchants Limited, National Australia Bank Limited, and Xero. 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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