Financial technology (fintech) is a fast-growing segment of the broader financial sector, and revenue generated by companies in this space could be massive. Estimates from BCG put the global fintech market at $1.5 trillion in sales by 2030.
That's just an estimate, of course, but it's a good indicator of why companies are competing to be on the cutting edge of new fintech services. Two such companies that are already in a good position to benefit as fintech grows are Sofi Technologies (SOFI -2.41%) and PayPal (PYPL -0.03%). Here's why.
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SoFi is a fintech juggernaut
SoFi has expanded quickly over the years, adding new services and financial offerings that now include loans, investing, checking and savings accounts, loan refinancing, credit cards, and even estate planning.
To put SoFi's growth in perspective, consider that the company had over 1 million members at the beginning of 2020. In December, it announced that it now has more than 10 million members -- a 9x membership increase in just five years.
SoFi's strong membership base has translated into impressive financial results. The company increased sales by 30% in 2024's third quarter to $697 million, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped 90% to $186.2 million.
SoFi's stock has been on a massive run over the past six months, rising 137% as of this writing. The gains have driven up the premium for SoFi's shares, which now have a forward price-to-earnings (P/E) of 74. That's expensive by any measure, but starting a small position could be smart for long-term investors who want to own a piece of a fintech leader.
Don't count PayPal out
Some investors may overlook PayPal when seeking fast-growing fintech companies, but this large fintech player likely still has more growth ahead. The company's person-to-person payment app, Venmo, is a great example of how PayPal is willing to look to new areas for growth. Venmo is one of the leading payment apps, with an estimated 88 million users, up from 52 million in 2020.
PayPal's revenue rose 6% in 2024's third quarter to $7.8 billion, and its non-GAAP earnings spiked 22% to $1.20 per share. It also ended the quarter with $1.4 billion in free cash flow and $16.2 billion in cash and cash equivalents.
The company's 432 million global users are a testament to PayPal's leading position in fintech. Its 9% increase in total payment volume in Q3, to $422.6 billion, proves that the company knows how to get its users to continue using its payment platforms.
Investors looking for a good deal and a cheaper fintech stock than SoFi would be wise to consider PayPal right now. The company's shares have a forward P/E ratio of just 17.8, far below the S&P 500 average of 23.7.
It's worth mentioning that fintech stocks can sometimes be volatile, so if you're new to this investing segment, it's probably best to start with a small position and slowly add to it over time.
