The pandemic is accelerating the disruption new technology savvy companies are causing within the financial industry.
Face-to-face activities like going to the bank are impractical (if not impossible) when following social distancing rules, so more people are switching to digital alternatives.
Financial technology, often shortened to Fintech, is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial service. (source: Wikipedia, July 2020).
What's happening?
We have compared some of the best-known publicly traded companies that are involved in Fintech with the S&P 500. It's worth noting though that because fintechis still a new concept, many of the best known firms are privately held; including companies like Robin Hood, Revolut, ANT Financial.
Global Fintech shares vs. S&P 500 (year-to-date)
Past performance is not an indicator of future results.
- Hundsun Technologies (600570) - China
- PayPal (PYPL) - US
- Tencent (TCEHY) - China
- Square (SQ) - US
- Q2 Holdings (QTWO) - US
- Alibaba (BABA) - China
- S&P 500 (SPX)
Opportunity
It's clear to see that the fintech shares have outperformed the broader market as represented by the S&P 500. The investing case for the continued out-performance of these shares in continued disruption.
The longer the added disruption caused by the pandemic, the greater the opportunity for these upcoming alternatives to get more embedded into people's financial lives; and the better opportunity the shares represent.
While the long term opportunties are unchanged, the short term risk for these shares is that a combination of huge government support and an effective vaccine could limit the short term disruption and the traditional financial services will hold on.
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