Fintech Companies Look Ahead
Fintech Companies Respond to Changing Habits
During the pandemic, daily habits have been altered and fintech companies such as PayPal (PYPL) and Square (SQ) have stepped in to meet consumers’ changing needs in a variety of ways. One interesting trend is that more consumers have been using debit cards recently. This has benefitted a number of fintech companies.
Fintech stocks rallied during 2020 with Paypal, Square, and Shopify (SHOP) stock prices more than doubling. These stocks have gained less than 5% so far in 2021. But if these companies are able to continue meeting customers’ needs as the economy begins to reopen, they could see more growth.
Debit Cards Gain Popularity
Debit cards have gained popularity over the past year. According to Visa (V) and MasterCard (MA), debit card dollar payment and purchase volume was up 23% year over year in the quarter ending last fall. This was more than twice the growth rate before the pandemic. In contrast, the same measure for credit cards dropped by 8%.
This is partially because stimulus checks from the federal government are sometimes sent out on prepaid debit cards or they are deposited into checking accounts linked to debit cards. A number of fintech companies earn substantial revenue from fees collected on debit cards.
The Rise of Digital Payments
Fintech companies have also given consumers and businesses access to online and digital payment systems over the past year. People have increasingly used these systems for small, everyday purchases like groceries. These purchases also tend to be more debit-oriented.
Additionally, “buy now, pay later” systems have gained popularity recently. These payment methods allow consumers to make purchases in chunks on debit cards rather than with credit cards.
Millions of Americans are currently receiving stimulus checks. Meanwhile, sectors of the economy are beginning to reopen. Investors are curious to see if fintech companies will be able to adapt to changing conditions and continue the growth they have seen over the past year.
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