Everyone likes money.  But technology that handles money is what’s really popular these days.  The rise of “fintech,” or, financial technology, has unleashed a new breed of apps, sites and services designed to help consumers pay for goods, get loans and manage their retirement accounts. Fintech is a multi-billion dollar industry, with startups in the US raising around $18 billion since 2015, according to PitchBook and nearly 1,400 venture capitalist-backed deals. Two of the most valuable startups in the country — Stripe and SoFi — are in the fintech sector. And there are 11 fintech startups valued at more than $1 billion.  Quotation Sources, Business Insider/Inc.com. 

It’s easy to be cynical about the success prospects of any early stage enterprise aspiring to break through obstacles, and soar.  Most don’t make it.  However, some do. This is the nature of the hunt by early stage investors – finding companies with the right indicators predictive of success, like Digatrade.

In a future blog, we will set out the reasons that Digatrade (DIGAF), in particular, has what it takes. For now, let’s start with the foundation – the sector that DIGAF is in.

Question: Is this sector, “fintech”, really capable of still producing dramatic successes, or have all the early stage opportunities been “used up” since “PayPal” (the fintech success that we all know about).  It’s a reasonable question.  Answer: As a sector, fintech has much better odds than most to generate extraordinary success, and growth in valuation, under the right conditions.

There is a characteristic that fintech successes have in common.  It is factor that is almost unique to fintech as a sector.  This factor is not available to even the largest consumer product giants, airlines, military industries, food business or energy sector. Fintech is special because it has extraordinary leverage between capital and labor that favors the investor.  Only in fintech, and particularly in the payments end, can infrastructure deliver such dramatic productivity and reach out over a global operational landscape so efficiently, dealing with any human being who is a buyer of anything, anywhere, electronically.

In the payments area of fintech, we are not selling consumers anything.  We leave that to the rest of the world’s consumer businesses to battle out competitively between themselves.  In fintech payments, we are calmly waiting for vendors and customers to sort out the messy part of agreeing on the product, the pricing, the delivery, etc.  When all of that is already accomplished, we simply facilitate the transaction with an electronic payment technology and are rewarded for providing that service. We don’t have to wait long. The world’s payments system now processes thousands of consumer purchases per second – and there is much room for growth.  These are still early days. This is a deep insight for our shareholders.  We are not caught-up in consumer product trends and personal tastes.  We have the pleasure of serving consumers who have already decided to buy something from someone, somewhere – and it does not matter to us what that is.  It only matters that they pay electronically.  Then we are in the game.

The fintech sector is mostly based on electronic systems that generate a multiplier effect of fees that are shared by processors and their partners.  In fintech, it is possible to aggregate even fractions of a cent hundreds of millions of times with no human intervention, as the revenue is “harvested” by computers, then tabulated and recorded as a flow of money.  In fintech, particularly the payments security dimension, we focus on making it easier for the consumer to spend more money, more easily, more often, with more safety.  That’s all.  It’s a matter of intelligence, programming skill and attention to detail.  The big “but” is that our level of expertise in these three key qualities must be extraordinarily high.  That’s good for Digatrade, because the more you get to know us, the more you will see that we have the skill sets required.

Now the fun part.  Let’s go through a quick primer on some recent fintech initiatives that you may, or may not, have heard of that converted fintech’s unique characteristics into business initiatives that have each achieved valuations of over a billion dollars.  If any one of these founders had promised their earliest investors that they would now have a billion dollar valuation, the familiar skepticism would be present, and understandable.  Nonetheless, these are facts. This is the real world, not merely dreams.  This is the world in which Digatrade will be operating going forward – the world of “financial technology” entrepreneurism. Fertile ground for success.

          (In Reverse Order. All figures subject to change in value and method of calculation)

  • 11. Clover Health — $1.2 billion
    “Clover..aims to use data to improve its users’ health. The company analyzes patient data to identify gaps in care and potential medical issues, in order to prevent emergencies which might be costly to the insurance provider”
  • 10. Kabbage — $1.3 billion
    The company currently has more than 100,000 clients, and has lent more than $3.5 billion  to small and medium sized businesses since it launched.

  • 9. Robinhood — $1.3 billion
    “Robinhood, which was founded in 2012, is popular with Millennials who appreciate the $0 commission fee on its trades. Despite rejecting the common revenue model of its legacy competitors like Charles Schwab and E*Trade, the company makes money on interest from dollars and cents left in its customer’s accounts.”

  • 8. Avidxchange — $1.4 billion
    “Since its launch in 2000, the enterprise tech company, which offers services as banal as accounts payable and on-demand invoice management.”

  • 7. Coinbase — $1.6 billion
    “Its success comes at a time of transition for cryptocurrencies from a side project for hackers to a mainstream investment option; many users are still intimidated by cryptocurrencies and the blockchain technology behind it, so they rely on companies like Coinbase to authenticate their investments, and bring a bit of old school establishment to the Wild West of digital exchanges.”

  • 6. Apttus — $1.9 billion
    “The company, which was founded in 2006, specializes in what it calls “quote-to-cash software” — essentially, Apttus uses artificial intelligence to make the sales contract process go more smoothly.”

  • 5. Avant — $2 billion
    “The personal loan company….uses a mix of artificial intelligence and consumer data to establish interest rates for customers.”

  • 4. Oscar — $2.7 billion
    “The company sells individual health insurance plans on a user-friendly digital interface with branding that screams lifestyle brand, rather than the more stodgy safety-net vibe from brick and mortar insurance vets.”

  • 3. Credit Karma — $3.5 billion
    “The personal finance company, which specializes in issuing free credit scores and reports, launched in 2007. It’s since taken over the digital credit monitoring space, thanks in part to large scale data breaches like Equifax, which have left consumers concerned about fraudulent credit activity.”

  • 2. SoFi — $4.4 billion
    “SoFi — short for Social Finance — is an online lender which focuses on refinancing student loans and mortgages for low-risk borrowers. It’s made a dent in the financial service space as a new type of lender outside of the traditional banks.”

           AND THE WINNER, FOUNDED IN 2010 FROM SCRATCH, IN THE PAYMENTS END OF  THE FINTECH SECTOR:

  • 1. Stripe — $20 billion
    “Stripe is a payments processing startup that lets any business accept credit cards, Apple Pay, and other similar services. Some of its biggest customers include Lyft, Salesforce and Amazon. It’s quickly become the standard for online payments, though the company still faces some competition from startups like Braintree and longtime power players like PayPal.”