The GameStop Corp. (NYSE: GME) saga might be coming to an end soon – shares have fallen as low as $81 as of midday Tuesday.
Let’s be clear: The tech trend underlying this remarkable story isn’t over by a longshot. There’s much more disruption to come.
I’m talking about financial technology – “fintech.”
Fintech is about much more than trading; it’s about much more than payments.
It’s changing how people invest, shop, save, pay – how people deal with money, period. Fintech “touches” around 5% of global e-commerce sales (excluding China). That sounds miniscule, at first, but we’re talking big bucks here – around $166 billion and counting.
One company I know of leveraged this the smart way to grow its share price by triple digits last year, and I think 2021 could be even bigger…
This Trend Is Disrupting a $1.1 Trillion Industry
There are four little letters everyone should get familiar with today – believe me, you’ll be glad you did.
That’s short for “buy now, pay later.” It’s one of the latest and most lucrative trends fintech is driving right now.
It’s essentially high-tech credit. If you’ve ever taken out a loan, or even used a credit card, you’re familiar with the basics. But when it comes to BNPL, there’s a twist – one threatening to upend the $1.1 trillion credit card industry.
Try making a purchase online. Toward checkout, you’re all but guaranteed to see a BNPL offer to split your purchase into two, four, or more installments. In effect, you’re being offered a short-term loan with no interest – the chance to buy now, pay later.
That zero-interest factor is only one of the advantages BNPL has over credit cards. BNPL also often comes without any fees and can be accessible to people without credit history.
There’s also an appeal to not having to add to one’s debt because America is positively swimming in it. The average household now has $7,000 in credit card debt, and pays around $1,200 annually to carry it. Younger generations may have it even worse, as the college graduating class of 2018 was left with an average debt of $29,200. That’s the highest ever.
Ultimately, though, with BNPL, you’re really just cutting one big payment into a few smaller chunks. That reduces “sticker shock,” making sure people can buy what they want. Merchants, as you might guess, see more sales of higher-priced items, particularly consumer electronics.
And remember: The BNPL offer happens at checkout. A customer is usually notified instantly of their eligibility. Compare that to the weeks it takes to apply for a credit card. And in another blow to traditional credit cards, some BNPL providers let customers choose from a variety of repayment periods, including longer ones with interest.
For retailers, BNPL is a no-brainer: They realize higher sales, and they’re paid in full, up-front, by the BNPL provider, minus a small fee, which is about the same as they would pay to the credit card companies anyway.
It’s no surprise, then, that FIS Worldpay projects the global BNPL market will soar from $60 billion in 2019 to a whopping $166 billion by 2023.
That’s an impressive 177% increase in under four years, and one stock is perfectly positioned for that growth.
This Pioneer Is a Leader in Fintech and BNPL
I’m talking about PayPal Holdings Inc. (NASDAQ: PYPL), which launched a BNPL solution called “Pay in 4” just this past September.
BNPL is really just the latest reason to own PayPal, the $94 billion granddaddy of fintech stocks. For starters, PayPal has exposed millions to the versatility and potential of cryptocurrency.
It’s the all-electronic payment processor for e-commerce websites, small businesses, and individuals looking to move money quickly. It boasts more than 305 million active accounts – more than 286 million in the United States alone.
Now, when many people hear “PayPal,” they think “eBay.” After all, eBay Inc. (NASDAQ: EBAY) owned PayPal from 2002 to 2015, when it spun PayPal off to massive success. PYPL shares have soared more than 615% since its independence, but more than 116% of those impressive gains have come since the March 2020 “COVID Crash,” when lockdowns made e-commerce explode. Each PayPal account makes an average of 40.1 payment transactions in the third quarter of 2020. That adds up to 4 billion payment transactions, for a total volume of $247 billion.
PayPal sits at all-time highs today, but I think these low prices will be a distant memory. Per-share profits have grown 25% a year, on pace to double in less than two years.
BNPL is going to be critical for that growth.
PayPal’s BNPL system keeps it dirt-simple: For purchases between $30 and $600, consumers can split the payment into four equal parts. The first one is due immediately, and the other three are due every two weeks after that.
All it takes to sign up is a PayPal account, which, as I said, hundreds of millions of Americans have. The system comes without any fees or interest. In fact, applying for it doesn’t even ding your credit history the way taking out a loan or applying for a credit line would.
And because it’s PayPal, it’s already available at millions of online stores, including multibillion-dollar outfits like Best Buy Co. Inc. (NYSE: BBY), Bed Bath & Beyond Inc. (NASDAQ: BBBY), and Target Corp. (NYSE: TGT).
PayPal and BNPL are why I expect fintech to be an economy-defining sector in 2021, with huge opportunities to crush the market.
— Michael A. Robinson