We recently compiled a list of the 10 Best Fintech Stocks To Buy Now. In this article, we are going to take a look at where Visa Inc. (NYSE:V) stands against the other fintech stocks. If interested, you can also read our piece on the 12 Best Financial and Fintech ETFs to Buy.
Fintech services have become an integral part of our lives in recent years, greatly changing the finance sector. Consumers no longer need to queue up in banks to get their statements, be involved in money transfers, or carry heavy wallets to pay for their groceries in cash only. Mobile banking, credit cards, and digital wallets have revolutionized how people manage their finances.
Global Fintech Industry
A report released in May last year by the Boston Consulting Group (BCG) has projected the fintech industry to grow by over six times to reach a size of $1.5 trillion by 2030, from its current level of $245 billion. The sector’s share of the financial services industry is also forecast to jump from 2% to 7% during this period, with Asia-Pacific set to go past the United States to become the world’s largest fintech market.
The fintech industry in Asia-Pacific is set to grow 27% between now and then, with China, India, and Indonesia leading the drive due to their sizable unbanked population, and a large number of small businesses in these countries. North America, in particular, the United States will, however, continue to remain a critical market and lead innovation in the industry. The market is also projected to significantly grow in the emerging economies of Latin America and Africa.
That said, while the market is set to grow over the coming few years, 2023 was a difficult year in comparison to the boom in the preceding years. According to KPMG, it was the slowest year in the global fintech industry since 2017, with around $114 billion in worldwide investments across 4,547 agreements. Financial experts say high inflation and ongoing military conflicts in Ukraine and the Middle East led investors to become cautious with their spending.
The decline in fintech investments was noticed across various regions, with Asia-Pacific experiencing its biggest slump from $51 billion in 2022 to just under $11 billion in 2023. Investments also halved in Europe, the Middle East, and Africa from $49.6 billion to $24.5 billion. In the Americas, investment slowed 22% during the period. For 2024, the American credit rating agency Fitch Rating anticipates mixed results for fintech companies in North America and Europe, with revenue growth expected, but EBITDA margins likely to remain muted.
Rise of Gen AI in Fintech
Generative AI, or Gen AI, has taken much of the global financial services industry by storm. According to McKinsey, the technology is likely to add between $200-340 billion to the market over the next few years. Fintech firms are actively keeping up with the trend, and making sure they adapt to Gen AI’s capabilities and risks, both. Between 2022 and 2023, the share of fintech corporations that had improved their artificial intelligence capabilities had increased from 30% to 70%. On the other hand, about 90% of the fintech companies surveyed in March this year by McKinsey stated that they had established centralized Gen AI functions. According to experts, the use of this technology is poised to make firms in the fintech industry more agile and efficient over the coming years.
Methodology
Insider Monkey’s database of 920 hedge funds was assessed, as of the first quarter of 2024. We have chosen the 10 best fintech stocks to buy now based on the hedge fund sentiment towards each stock. The stocks are ranked in ascending order of hedge fund holders in each company.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a modern payments terminal with a pile of credit cards on the side.
Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 166
Visa Inc. (NYSE:V) is the best fintech stock to buy now. According to Insider Monkey’s database, 166 hedge funds are bullish on Visa. The payment technology company is widely acclaimed across the world for processing transactions through its VisaNet network.
The company’s share price has increased 22% over the last year, with one share worth over $275 now. Visa Inc. (NYSE:V)’s financial performance continues to remain robust. In April this year, the company announced that it beat estimates for the quarter, posting $4.66 billion, or $2.29 per share against the projected $4.26 billion, or $2.03 per share.
Wedgewood Partners shared optimism for Visa Inc. (NYSE:V)’s future trajectory in its Q1 2024 investor letter:
In the first quarter, the Company grew earnings per share +11% as payment volume growth was up +8% and cross-border payment grew a solid +16%, adjusted for currency. Beyond their consistent growth and execution, recent regulatory trends have caught considerable investor attention. The Company’s networks and value-added services drive enough economic value to bank customers and retailers that the addressable market for payments should continue growing at a healthy rate for many more years, regardless of recent regulatory changes. Visa’s value-added services can be extended to less-sophisticated, emerging non-Visa networks to help grow the overall payment ecosystem that makes up the vast global payment addressable market. For example, not long after debit interchange rates were regulated last decade, Visa began an aggressive push to allow non-bank 2inancial institutions access to Visa’s networks, which helped drive more interchange volume to banks and offset lower interchange rates. This was a key element that spawned the massive “Fintech” industry that exists today. We continue to expect Visa’s scale and breadth of service offerings will help them drive attractive growth at stellar margins along with the overall payments ecosystem.
Overall V ranks 1st on our list of the best fintech stocks to buy. You can visit 10 Best Fintech Stocks To Buy Now to see the other fintech stocks that are on hedge funds’ radar. While we acknowledge the potential of V as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
