Fintech is hugely popular these days, attracting a wide variety of startups. From payment processing to crowdfunding to cryptocurrency, fintech is a fast-growing industry. Despite all the new names, though, fintech also includes familiar names that have been around for years.
As we will find out, the best small-cap fintech stocks right now do include several names most of us already know. Still, recent developments in the world of fintech, such as the growth of digital payments, make this an exciting industry for companies both old and new.
Here are some small-cap fintech stocks to watch:
- CPI Card Group Inc. (OTC: PMTS)
- Greenbox (Nasdaq: GBOX)
- Green Dot Corp. (NYSE: GDOT)
- Katapult Holdings (Nasdaq: KPLT)
- World Acceptance Corp. (Nasdaq: WRLD)
What Are Fintech Stocks?
We mentioned a few of the different types of fintech stocks above. When we think about fintech, some of the types of businesses that are included are:
- Financial services
- Financial software
- Payment processing
- P2P lending
- Online banking
As you might have guessed, fintech is the intersection of finance and technology. In some cases, a fintech, such as a payment processor, is a company’s entire business model. In other cases, a bigger company might own fintech products and use them to improve its business. In either case, we include them as fintech stocks because they are a part of this fast-growing industry.
One thing to note about fintech is there is still a lot of room for growth, not just for individual companies, but for the industry as a whole. In the US, there were 64 million mobile payment users in 2019. Compare that to the total number of smartphone users, at almost 288 million in the same year. That’s still well over 200 million people still not on board with mobile payments.
Best Small-Cap Fintech Stocks to Buy
Now, we’ll take a closer look at some of the top fintech stocks today and why they make the list.
CPI Card Group
CPI Card Group provides EMV (Europay, Mastercard and Visa) as well as dual interface contactless cards. It has a focus on quality and produces metal cards, eco-focused cards and whatever meets its customers’ demands. You might see its market cap slightly below the small-cap threshold, but this company has been growing fast. Its market cap may well be in that range before long.
When it comes to cryptocurrency, one of the biggest challenges right now is using it as a currency rather than just a store of value. This is the problem that GreenBox is helping to solve. Don’t confuse this company for the recycled pizza box maker of the same name. Nope, this GreenBox is very different, and a lot more scalable. Its revenue is growing rapidly, as is the volume of payments it processes.
Green Dot is one of the pioneers of the fintech industry. Founded in 1999, it has been around since most people had dial-up internet (if they had internet at all). Back then, it introduced a prepaid debit card for teenagers to use when shopping online. The company went public in 2010 with a market cap of around $2 billion; it has increased modestly since then. Although it faces competition from companies like PayPal, it is trying to differentiate itself with a mobile bank account with overdraft protection.
Katapult is an online lease-to-own platform that helps customers purchase products from major retailers such as Wayfair, Lenovo, Gazelle and more. It went public as part of a special purchase acquisition company (SPAC), merging with payment processor FinServ. Its market cap after the SPAC came in at a cool $1 billion. This is certainly a unique business model, and its revenue is growing rapidly through loan originations. It is continuing to partner with new retailers, which should only help it grow even more.
World Acceptance Corp.
World Acceptance Corp., also known as World Finance, provides personal loans through its subsidiaries in 16 states. The company has been around since 1962, so this isn’t exactly the newest, up-and-coming startup. However, it is worth over $1 billion and operates over 1,000 branches. Perhaps more importantly, its expenses recently saw a significant decrease, and its income increased by an even bigger margin. The company has strong fundamentals, and its future appears bright.
Are Fintech Stocks Overpriced?
This is a complicated question and one that can have different answers depending upon who you ask. Some experts do believe that fintechs can be overvalued, particularly seeing several mergers and acquisitions with massive price tags.
However, not everyone agrees that we are seeing a bubble in the fintech space. It’s important to note that while some of the recent mergers, acquisitions and SPACs have very high price tags, many of the companies involved do in fact make money. In addition, they are in many cases seeing steady growth.
It would be a very different picture if their balance sheets were full of red or if they weren’t growing. But oftentimes, the fundamentals are strong.
It’s always a good idea to evaluate the whole picture. For example, does the stock you are considering have a high price-to-earnings ratio compared to its competition? Simply put, if the numbers look good, the stock may not be overpriced even if the price seems high.