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When people think of the financial sector, they typically think of boring businesses like banks or insurance companies. But the ongoing global shift to electronic payments has created a new, growthier industry of financial technology companies. These businesses tend to feature recurring revenues, high free cash flow, and low capital expenditures. The financial services sector, which houses Visa and Mastercard, returned 28% last year, while the consumer finances sector, home to credit card companies like American Express and Capital One, returned 55%, outperforming the Magnificent 7. Continued growth in consumer spending, a steeper yield curve, and prospects for deregulation could support further upside, though there are risks if regulatory relief isn’t as significant as markets expect. Nonetheless, for investors looking for high-quality growth opportunities outside of mega-cap tech, fintech could certainly be a good place to start.
On this episode of Insights Now, my new co-host, Gabriela Santos, will be joined by David Chan, an equity research analyst covering payment and business services companies here at J.P. Morgan Asset Management, to discuss what David is seeing across this space.
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