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Date : 04/12/2020

Should You Invest in Fintech?

How’s Fintech Doing?

Fintech is a very big segment. However, in Australia, the Buy Now Pay Later (BNPL) overshadows every other segment. Peer-to-peer lending, digital payments, neo banking are some of the other segments in fintech that is poised to boom in the coming years. Given the dynamic business models and robust outlook, fintech stocks usually demand high valuations and high Price to Earnings ratios.

Most of these fintech stocks have been performing well during the pandemic. While a large chunk of the investors tipped them to go down, these fintech firms have become stronger as they emerge out of the pandemic.

Investing in Fintech: Should You Do It?

The fintech space in Australia is in its very nascent stage compared to other, more mature markets such as the US, China, and India. This is largely due to relatively slower adoption from brick and mortar services we are used to. However, in Australia, a lot of these fintech companies have gone public very early into their business. This offers a chance to investors such as us to get in on the action from a very early stage.

We have already seen the returns that fintech stocks such as Afterpay and Splitit returned in 2020. The robust outlook for the entire sector means that this growth stage is going to continue for most of the fintech shares that are listed on the ASX.

Top 3 Fintech ASX Shares to Invest In

Afterpay (ASX: APT)

Afterpay is the largest player in the high growth buy-now-pay-later (BNPL) space. Having taken the Australia and New Zealand market by storm, Afterpay has now had a growing presence in the USA, Canada, UK, and is now entering the European Union. In addition to the first-mover advantage the firm has, it has very smartly taken on mergers and acquisitions to enter new markets. Acquisitions have added synergies such as existing users and lower customer acquisition costs. Afterpay has consistently shown a high user and merchant growth rate. This increases the total volume of transactions, which becomes extremely important in an industry characterised by low margins. In addition to strong

performance, Afterpay is in a very flexible position financially – with low debt levels.

Consumer behaviour changes have fuelled growth and will continue to do so. As the competition heats up in the BNPL sector, a global dominator such as Afterpay offers the best risk-reward ratio, especially for fintech stocks.

Splitit (ASX: SPT)

Splitit is another fintech stock in the BNPL space that enables its technology directly through Visa and Mastercard. This essentially allows customers that use Visa and Mastercard to be able to take advantage of BNPL for their purchases. Splitit has found a different approach to its competitors. Their model comes with zero credit risk to them, zero charges to the consumer, and of course, there is no additional application or sign-up a user has to go through since its technology is packaged with their credit card that has already been issued by their bank.

Splitit has very low levels of debt on its balance sheet, which de-risks the investment for investors looking to gain exposure to the fintech shares on the ASX.

Raiz Invest Limited (ASX: RZI)

Raiz invest is a micro-investment platform that allows Australians to invest in ASX listed shares. They allow their customers to invest both – small and large amounts right from their mobile application. Raiz operates in Australia, Indonesia, and Malaysia currently. The popularity surrounding the stock is largely due to Raiz allowing everybody, irrespective of their budget to get in and gain exposure to equity markets. At a time when bond yields are low, and many Australians are cash strapped due to the effects of the pandemic. Data and surveys show that a large population do not enter equity markets because they cannot afford the large brokerage fees and minimum investment amount. Raiz is solving this problem at scale. Other markets such as the US, India, China, and Europe already have platforms that allow users to invest small amounts and buy parts of a share. The popularity these platforms have gained shows us just why Raiz is here to stay and has a very robust outlook.


Fintech is the future of the financial services industry the growth outlooks are high. The nascent phase of the industry in Australia means that investors can gain exposure to a lot of fintech stocks before they become larger companies.

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