Fintech Industry Titans to Allocate Capital
In the dynamic world of financial technology (fintech), the competition between US and UK companies is heating up. Here's a glimpse into the key players and their core areas of focus.
Upstart (NASDAQ: UPST) is an AI-powered online lending marketplace that revolutionizes the lending industry by using alternative data points to approve loans, particularly targeting younger and lower-credit applicants. This innovative approach sets it apart from UK digital lenders.
Nu Holdings (NYSE: NU), a digital-only bank based in Latin America, is another fast-growing player. Listed on the US market, Nu Holdings competes with UK digital banks by offering modern banking through tech platforms, emphasizing digital-first services and rapid growth.
Wise (NYSE: WISE), formerly known as TransferWise, is a UK-founded fintech specializing in cross-border payments and foreign exchange. It competes with UK rivals like Revolut and PayPal in the US market, leveraging cost leadership, regulatory expertise, and technology such as AI-driven RegTech to maintain competitive advantages.
Other significant US fintechs include PayPal and Stripe, which provide entrenched payment ecosystems that pose formidable competition to UK payment startups. Emerging fintech startups like Bilt Rewards are innovating in payments and loyalty programs tied to rent and home buying, reflecting the diverse US fintech landscape.
Meanwhile, in the UK, Revolut is making waves with sales of $2.2 billion and pre-tax profits of $545 million. Its valuation increased to $45 billion in a secondary share sale in August, and it's reportedly heading for a UK initial public offering (IPO). Starling Bank is also considering a blockbuster flotation.
Notable fintech company JPMorgan Chase (NYSE: JPM) also operates in the US, trading on a forward p/e of 12.5 times earnings. Despite being based in the US, Klarna, although Nordic by origin, has headquarters in London and is considering a UK listing.
In the race for growth, US equities seem to be outpacing UK equities. However, the UK stock market lacks a significant number of growth-orientated companies. NuBank, listed on the public markets in the US under the name Nu Holdings (NYSE: NU), is already solidly profitable and is selling its services into under-served markets where consumers distrust legacy financial services brands. Its second-quarter revenue was 55% higher, reaching $2.85 billion, and it added 5.2 million new customers in the quarter and 20.8 million year on year. NuBank's earnings increased by 115% compared to the previous year, and its deposits increased by 64% annually. By 30 June, its total customer base reached 104.5 million.
Cross-selling its services at a rapid pace, NuBank's non-performing loan ratios decreased, indicating a healthy financial standing. On the other hand, Revolut, a digital bank, had its valuation increased to $45 billion in a secondary share sale in August. It currently boasts 45 million customers and customers' balances of $23 billion.
In summary, the primary US stock market fintech rivals to UK fintechs are Upstart, Nu Holdings, Wise, PayPal, Stripe, JPMorgan Chase, and Klarna. These companies exemplify top fintech firms listed or operating on US stock markets competing with UK fintech companies across lending, payments, and banking sectors. The financial technology sector is one growth area where the UK excels, with companies like Revolut and Starling Bank making significant strides.
- Upstart, with its innovative AI-powered lending approach, focuses on serving younger and lower-credit applicants in the finance industry, setting it apart from UK digital lenders.
- Nu Holdings, a digital-only bank based in Latin America, leverages technology platforms to offer modern banking services, competing with UK digital banks in the realm of digital-first services and rapid growth.
- Wise (formerly TransferWise), a UK-founded fintech, emphasizes cost leadership, regulatory expertise, and technology such as AI-driven RegTech to maintain competitive advantages in the cross-border payments and foreign exchange sectors, while competing with UK rivals like Revolut and PayPal in the US market.
