The ASX Fintech shares have been in the spotlight lately due to the recent growth the industry has experienced. This growth has, therefore, resulted in share prices rising.
‘Fintech’ is short for financial technology and is thought by many to be the future of finance. This comes as people’s lives are becoming increasingly more digital. But one thing is for sure, and that is fintech shares have made a lot of people huge returns, especially in recent months. People have largely moved towards online alternatives as a result of the coronavirus.
When analysing fintech companies, we can usually base our findings on customer numbers and revenue. If the company has a substantial number of both, it can become of value to a major company as a takeover target or, it can convert these figures into profits and later pay dividends.
While fintech solutions have become popular with consumers, it’s possible they are still in their early stages and have a lot of market penetration left to cover. Although the companies below have reached a substantial number of customers, their volumes are small when considering the number of consumers within their operating markets. This leaves room for huge growth.
The below ASX fintech shares have been stellar performers and show strong potential for further growth:
Afterpay Ltd (ASX: APT)
Afterpay is likely Australia’s most famous and successful fintech solutions provider. The ASX fintech provides a platform that allows online shoppers to ‘buy now’ and ‘pay later’. Since June last year, the Afterpay share price has returned 182%. This is the kind of annual return that even Warren Buffet would rarely get from a single investment.
Afterpay’s success has come following its growth in Australia and especially in the US. In May, Afterpay was used by more than 8.4 million active customers internationally with 5 million active customers in the giant US market. The company is now offered by more than 15,000 brands and retailers. In Q3 FY20, Afterpay processed $2.4 billion in transactions, a massive 354% increase from Q3 Fy19.
Additionally, the Afterpay share price has been boosted by buying from China’s Tencent Holdings Ltd. In April, Tencent bought shares on market and built a 5% holding in Afterpay.
Zip Co Ltd (ASX: Z1P)
Zip Co listed on the ASX in 2015 and has seen considerable success since that time. Since its IPO price of $0.20 cents, Zip Co’s share price has increased by 3075%. This means that every dollar invested in Zip Co 5 years ago is worth over $30 today.
Zip Co is accepted by more than 18,000 retailers in Australia and offers 2 products; Zip Pay and Zip Money. Both of these products allow purchasers to buy now and pay later online and in-store with participating retailers.
In May, Zip Co’s monthly revenue was $15.6 million. This was a huge 78% increase year on year from May 2019. Zip Co has 2.1 million customers in Australia and New Zealand and it processed $189.3 million in transactions in May. Further, customers repayment rates were higher or on par with pre coronavirus levels.
Zip Co recently entered the US through its acquisition of QuadPay. The company estimates the US retail market to be worth over US$5 trillion per year. At the end of March, QuadPay had more than 1.5 million customers and there were 3,500 merchants accepting payment through its platform. Given that rival Afterpay has seen such significant success in the US, there appears to be huge potential for Zip Co to grow in the US market.
Sezzle Inc (ASX: SZL)
Sezzle is another buy now pay later platform for online shoppers. It is headquartered in the US and has exposure to the giant US retail market. Since April, the Sezzle share price has increased by 859%. This is a huge return over a 3 month period and reflects the recent success of the group as more people have moved towards online shopping.
Sezzle has 1.3 million customers and its platform is offered by almost 15,000 merchants. Sezzle is developing innovative products, including online payment cards to attract lucrative Gen Z and millennial generations. It estimates that the Gen Z US consumer population will reach 84 million in 2020 and that the US millennial consumer population will reach 69 million in 2020. Additionally, it estimates that a huge 25% of spending power will belong to Gen Z this year. Further, Sezzle has estimated that 67% of Millenials have a sub or non-prime credit score. This may make Sezzle a great choice for them and provide a sustainable alternative to credit cards.
According to Sezzle, 53.7% of its consumers are millenials.
This ASX fintech share has experienced triple-digit revenue growth year on year since 2018 and, as reported, continued this trend in the first quarter of 2020. In April, Sezzle achieved underlying merchant sales of US$119.4 million, a record for the company.
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Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. 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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