What Is The Number 1 Fintech Stock? Anyone born in the 20th century remembers when carrying cash was a must. Small businesses, vendors, and merchants couldn’t qualify for merchant services from commercial banks, so they couldn’t accept credit and debit cards.
Those that met eligibility requirements couldn’t afford the fees, so they had to go cash-only as well. Customers that didn’t have cash on hand were out of luck, and microbusinesses lost sales as a result.
E-commerce created change for individuals who previously had no ability to accept payments made on credit and debit cards.
The introduction of PayPal (PYPL), eBay (EBAY), and Shopify (SHOP) made it possible to buy and sell online with digital payments.
However, it wasn’t quite enough.
Brick-and-mortar businesses without the ability to accept credit cards still found themselves losing sales. Consumers demonstrated a strong preference for the convenience of credit and debit card payments.
In 2009, a new crop of digital payment companies tried to fill the void, including Venmo, Stripe, and Square (SQ), but only Square delivered the sort of innovation that disrupted traditional merchant services for good.
Square developed a credit/debit card reader that was compatible with mobile devices, along with a comprehensive collection of other payment tools. Suddenly, anyone could accept credit card payments in person, over the phone, and online.
Square Transforms Financial Services
Since its debut, Square has been on the cutting-edge of fintech.
After the initial Square Reader, the company introduced the Square Stand – a complete point-of-sale system powered by mobile tablets. That was followed by a self-contained point-of-sale system that met the needs of very small businesses.
Aside from its payment platforms, Square (SQ) simplified other business services, making them more affordable for start-ups, sole proprietors, and entrepreneurs. Examples include Square Capital, Square Payroll, and an online booking tool.
Businesses aren’t the only winners when it comes to Square’s fintech innovation
. In October 2013, the company launched Square Cash, which is now known as Cash App. This service makes peer-to-peer digital cash transfers possible through a mobile app – a convenience that has quickly gained popularity with Millennials and Gen Z. Both groups are digital natives who are open to any opportunity for moving tasks and transactions online.
As of December 2020, Square reported that Cash App has a total of 36 million monthly active users (MAUs), and that is expected to grow further as the platform adds features.
It already permits users to buy and sell Bitcoin – one of the few reputable options available – and it is exploring other traditional banking services such as debit cards and micro-loans on-demand.
All of these products, from Square Reader to Cash App, became popular as soon as they were released. That success has turned Square from a start-up in 2009 to a $100 billion company by 2020.
Square held its IPO in 2015, and Square stock has since gained more than 1,900 percent. That’s great news for shareholders who bought in early, but it’s not too late for everyone else. Analysts suggest that this is the one fintech stock to supercharge portfolio returns in the coming year.
The Rise of E-Commerce: What Is The Number 1 Fintech Stock?
E-commerce is rapidly gaining market share, and the COVID-19 pandemic dramatically increased the rate at which consumers choose online purchases over those at brick-and-mortar businesses. However, by nearly every measure, e-commerce is still in its infancy.
For the moment, developed countries are leveraging e-commerce tools more heavily than emerging economies. For example, in the United States, 21.3 percent of all retail sales were made online in 2020. That leaves plenty of room for growth in the United States and similar economies.
Meanwhile, increased online access in less-developed nations is opening new markets for e-commerce and the companies that make digital transactions possible – including Square.
Why Square Is The Fintech Stock to Supercharge Portfolio Returns
The beauty of Square’s systems and services – and the reason it has been so successful – is that it offers integrated end-to-end solutions.
That’s attractive for businesses of all sizes – even those previously serviced by commercial banks – because traditional products typically have to be combined piecemeal from a variety of vendors, which often leads to compatibility issues.
Square’s focus on creating a comprehensive ecosystem that includes software, hardware, and financial services has made it a market leader – and that’s been great for Square stock.
Though its original customer base was centered on small and microbusinesses, larger companies are becoming interested in Square’s integrated technology.
In the fourth quarter of 2018, companies with more than $500,000 in annual sales made up 24 percent of Square’s gross purchase volume (GPV). Today, that figure has grown to 35 percent.
Better still, Square is expanding into new markets, and that is likely to drive additional growth. It has already started working with businesses in Ireland, and it is beginning a soft launch for merchants in France.
New Products and Services Attract Cash App Users
The Cash App ecosystem is expanding as well, and that is bringing new users onboard.
The combination of banking and brokerage services, along with conveniences like direct deposit and debit cards, have persuaded consumers against holding multiple accounts with multiple financial services institutions. Instead, they prefer to keep everything together with Square.
Square’s ongoing investment in expanding products and services has the effect of increasing user engagement. That is directly connected with organic growth in sales of products and services.
Square benefits tremendously from this type of growth because expenses associated with acquiring new customers are virtually nil as compared to commercial bank peers. Data show that the average bank spends approximately $1,500 to bring a new customer in, while Square can do it for just $5.
Smart Acquisitions Make Square Stock A Buy
Square’s decision to acquire Afterpay, a service that gives consumers interest-free short-term financing for their purchases, can only enhance the company’s growth prospects.
This service is popular among consumers, and it has been shown to increase merchant sales – a win/win. With Afterpay integrated into Square’s existing ecosystem, many analysts believe Square stock will go up. That makes Square stock a smart buy.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.