Public Markets Are Not Buying the Payment Disruption Story

Snapshot of prices dated Jan 8.

New cut off at $1bn market cap (as $2bn is hurdle to escape small cap hell). This edits out some interesting companies such as Ondeck at $645m (which maybe acquisition bait like othet sub $1bn Fintech companies such as Yodlee and XOOM).

Categorization is always debatable. I started with these – Payments, Wealth Management, Software Vendor (aka Traditional Fintech) and lending Market (with Lending Club in splendid isolation after Ondeck failed to make the cut). I left Fair Isaac (FICO score) uncategorized.

Here is Index ranked by Market Cap:

SYMBOL NAME Category MKT CAP
V Visa Inc. Payments 180.22
MA MasterCard Incorporated Payments 104.05
AXP American Express Company Payments 63.07
PYPL PayPal Holdings, Inc. Payments 40.8258
SCHW The Charles Schwab Corporation Wealth Mgt 38.94
FISV Fiserv, Inc. Software 20.17
AMTD TD Ameritrade Holding Corporation Wealth Mgt 16.93
IBKR Interactive Brokers Group, Inc. Wealth Mgt 15.22
ETFC E*TRADE Financial Corporation Wealth Mgt 7.96
MSCI MSCI Inc. Wealth Mgt 7.15
FDS FactSet Research Systems Inc. Wealth Mgt 6.3
SSNC SS&C Technologies Holdings, Inc. Software 6.28
JKHY Jack Henry & Associates Inc. Software 6.15
MRKT Markit Ltd. Wealth Mgt 5.14
SQ Square, Inc. Payments 3.653
LC LendingClub Corporation Lending Market 3.6501
DH.TO DH Corporation Software 3.44
FICO Fair Isaac Corporation 2.84
ACIW ACI Worldwide, Inc. Payments 2.31
WPG WP GLIMCHER Inc. Payments 1.969
WETF WisdomTree Investments, Inc. Wealth Mgt 1.93

We can see that Payments dominate and the new entrants such as Square are still tiny. PayPal is still the only market cap challenger to the established credit card incumbents.

Sorting by Price Sales Ratio shows the same bias to size:

SYMBOL NAME Category PSR
V Visa Inc. Payments 12.92
MA MasterCard Incorporated Payments 10.73
LC LendingClub Corporation Lending Mkt 9.91
WETF WisdomTree Investments, Inc. Wealth Mgt 6.97
MSCI MSCI Inc. Wealth Mgt 6.77
SSNC SS&C Technologies Holdings Software 6.73
SCHW Charles Schwab Wealth Mgt 6.2
FDS FactSet Research Systems Inc. Wealth Mgt 6.1
AMTD TD Ameritrade Wealth Mgt 5.2
JKHY Jack Henry & Associates Inc. Software 4.81
MRKT Markit Ltd. Wealth Mgt 4.75
PYPL PayPal Holdings, Inc. Payments 4.56
ETFC E*TRADE Financial Corporation Wealth Mgt 4.29
FISV Fiserv, Inc. Software 3.88
FICO Fair Isaac Corporation 3.39
DH.TO DH Corporation Software 2.47
WPG WP GLIMCHER Inc. Payments 2.3
ACIW ACI Worldwide, Inc. Payments 2.26
AXP American Express Company Payments 1.99
IBKR Interactive Brokers Group, Inc. Wealth Mgt 1.71
SQ Square, Inc. Payments 1.53

The market is clearly signaling that they do not see the Visa and Mastercard incumbents being disrupted any time soon with both getting a PSR over 10. Square is a lowly 1.5.

Wisdom Tree is highly rated –the ETF data powering Robo Advisers.

Traditional Fintech software providers are still highly rated; although they are no longer an exciting disruptive story those great gross margins in software clearly still entice investors.

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