The financial technology, or fintech, industry was one of the hardest hit parts of the stock market in the post-pandemic bear market, but there are still some excellent opportunities. PayPal (PYPL -1.45%) is one great example with a stock price that is still about 70% below its 2021 peak and excellent turnaround progress in 2024, while SoFi (SOFI -3.74%) is an app-based bank with tremendous momentum.
However, these are two very different businesses. Here's a rundown of the bull cases for both stocks and what to keep in mind before you decide which is best for you.
PayPal wiped the slate clean and is now moving forward
After growth stagnated in the post-pandemic era and management didn't have a clear path to restoring the once-strong momentum, PayPal decided to make some big leadership changes. Not only was former Intuit (NASDAQ: INTU) executive Alex Chriss named CEO, but the entire executive leadership team was replaced.
The focus of the team was initially on efficiency. In the most recent quarter, PayPal's revenue grew by just 6% year over year, but thanks to efficiency improvements, earnings per share (EPS) soared by 22%. Management continues to buy back stock hand over fist, and the company is doing a great job with engagement, as evidenced by a 9% increase in transactions per active account.
However, many of the most exciting moves PayPal has made aren't reflected in the numbers yet. For example, the company announced it is creating an advertising platform and hired the former head of Uber's (NYSE: UBER) ad business to run it. It rolled out its Fastlane checkout product recently, as well as its PayPal Everywhere cash-back, debit-card initiative. And PayPal has announced several key partnerships, most notably with Shopify (NYSE: SHOP) to offer PayPal as a checkout option to U.S. customers.
In short, PayPal's efficiency efforts have been paying off. In 2025, its growth initiatives started to show results.
SoFi is one of the best products of the SPAC boom
Hundreds of companies went public through blank-check companies, or SPACs (special purpose acquisition companies) in the 2020 to 2021 timeframe, and to be honest, the bulk of them didn't turn out well for investors. SoFi -- which used one of Chamath Palihapitiya's SPACs to go public -- is a notable exception.
I don't say that just because it's one of the few with a share price above the $10 initial SPAC valuation. I say that SoFi is one of the best products of the SPAC era because not only has it sustained incredible growth momentum, but it has become profitable in the process.
Over the past three years, SoFi's member base has more than tripled, with 35% year-over-year growth in the most recent quarter. About 8.5 million financial services products like bank accounts, investment accounts, and credit cards have been opened in that period. And SoFi's deposit base grew from zero when it first got its banking charter in early 2022 to $24.4 billion in customer deposits.
As mentioned, SoFi has become consistently profitable, and its bottom-line income could soar in the next few years as the business continues to scale.
Two great fintech opportunities
To be perfectly clear, I don't think anyone will go wrong with either of these stocks. In fact, they are the two largest fintech investments I own in my portfolio (in full disclosure, SoFi is the bigger position).
PayPal shines when it comes to profitability, but there's a lot that needs to go right for sustainable growth to return to the business. On the other hand, SoFi is growing at an impressive pace and has been growing rapidly for years but just recently became profitable and is still in full growth mode. The best choice for you depends on which of those profiles fits best with your investment style.
