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What are fintech investment funds?

what are fintech investment funds?
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    Fintech is a short form of finance and technology. Broadly, the technologies used to make financial processes more efficient, simple, and profitable are called fintech. Fintech companies develop several software platforms and apps to make this happen.

    Companies that develop online payment processing solutions are an example of fintech.

    Why is fintech being invested in?

    Though the cashless payments space has grown over recent years, most payment transactions are still in cash. Banking institutions offer more interest rates and fees for online transactions than traditional banking; many still use branch-based services for their financial needs.

    One main reason fintech is important is that it democratises financial services. It improves financial accessibility by making financial services inexpensive and more convenient for the average person to address his basic financial needs. 

    Sales growth

    Sales growth is one driver which indicates company growth. Seeing tremendous growth in the current quarter or fiscal year is not the only consideration; it should also have a consistent track record of growth.

    • Balance sheet and profitability 

    Is the company highly geared? Do they have a substantial debt burden on the balance sheet, or are they rich in liquidity? Usually, companies with more cash than debt are relatively safer than profitable companies as the risk is lower.

    • Competition 

    Competitive risk is one of the main risks that impact the safety of the stock. Is the fintech company you are considering a market leader? Does it have large market players, or do few companies dominate it?

    • Competitive advantage 

    Competitive advantage also plays a crucial role. In the case of a fintech space, it could be patents, intellectual property, or proprietary technology.

    • Cyclicality 

    This means how sensitive the industry is to economic conditions or business cycles such as recession and boom. 

    Compared to American Express, Visa and Mastercard are less cyclical as they rely on fee income on spending, and they are not lenders.

    Hence, they do not have default risk, so they are less sensitive to recession. 

    Types of financial stocks

    The broad term ‘fintech’ refers to businesses that apply technology to finance. There are several types of companies under fintech.

    Let us see some of the products and services they offer

    • Online and mobile banking platforms
    • Online and peer-to-peer (P2P) lending platforms
    • Person-to-person payment apps
    • Mobile payments
    • Blockchain technology and cryptocurrencies
    • Brokerage services including stock trading apps
    • Contactless payments
    • Robot advisors and digital financial advisors that use algorithms and artificial intelligence (AI)

    What fintech metrics you should consider before buying?

    • Sales growth
    • PEG (price-to-earnings-growth) ratio
    • Retention rate
    • Margin expansion

    Are fintech stocks safe?

    Fintech stocks are high-growth companies that invest in heavily sophisticated disruptive technologies. Like in any stock market sector, fintech stocks also have a wide range of risks.

    Those fintech stocks that are high risk would give you a high return in the long term.

    Some fintech stocks could be safe, and some could be high-growth stocks, but money can also be lost.

    Accordingly, it is necessary to consider the key factors set out below when evaluating the fintech stock in your portfolio.


    Which fintech stocks pay dividends regularly?

    • Visa
    • Mastercard
    • American Express

    What are the four categories of fintech?

    • Digital lending
    • Payments
    • Blockchain
    • Wealth management

    Is fintech stock cyclical?

    Yes. For the most part, fintech stocks are cyclical. However, it also depends on the sector. For example, companies that develop technologies for insurance companies are not highly cyclical compared to companies that develop technologies for payments, as insurance is a recession-resistant business. Hence all fintech stocks are not equally cyclical.

    What is the future of fintech?

    Embedded fintech will dominate the industry in the future. Embedded fintech is where financial services will not be essentially offered as standalone, but rather will be part of the user interface of other products.

    Facebook Pay and Apple Card are examples of embedded fintech that are already in play. 


    Technology is changing every industry drastically, and the impact on finance will be immense. Hence investment in fintech stocks is highly productive and profitable if you have the best fintech stocks in your portfolio. 

    If you need further assistance or understanding regarding fintech investment funds, please feel free to call us on 0203 0111 898, and we will be glad to help you.


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