Table of Contents
Key Points
- Fintech banks continue to grow in popularity for their higher interest rates and lower fees.
- The best fintech banks can encompass a wide range of services, including crypto trading and robo advisors, in addition to savings and checking accounts.
- Many fintechs have some banking services but operate without a charter or under a partner FDIC bank’s charter.
- 5 stocks we like better than SoFi Technologies
Retail banking has undergone a digital transformation in the past two decades, with mobile banking playing a key role in the shift towards online and digital banking. Major banks have invested heavily in fintech to provide digital banking services, either through acquisitions or by building their own fintech divisions. Fintech banks, also known as neobanks, operate primarily online and offer personalized services, better interest rates, and fewer fees compared to traditional banks. They are on the cutting edge of digital innovation and continue to grow in popularity. Here are the five best fintech banks to consider investing in now.
Overview of Fintech Banks
Fintech banks, also known as neobanks, are chartered financial institutions that utilize technology and digital innovation to provide financial products and services to consumers. They operate primarily through mobile apps and do not have physical branch offices, resulting in lower overhead expenses. This allows them to offer higher savings interest rates and lower fees compared to traditional banks. While critics argue that digital bank regulation is less stringent than traditional retail banks, many fintech banks provide unique services such as stock and cryptocurrency trading, robo advisors, and a wider range of IRA investments. Fintech banks are FDIC insured for up to $250,000 per account.
Why Invest in Fintech Banks?
Fintech banks are at the forefront of banking technology and continue to gain popularity as more consumers gravitate towards online and digital financial services. They offer 24/7 access, convenience, and time savings. Fintech banks particularly appeal to the younger demographic who are native digital consumers and prefer the convenience of online banking. Investing in fintech banks allows forward-thinking investors to stay at the forefront of innovation in the financial industry.
5 Best Fintech Banks to Invest in Now
Here are the five best fintech banks to consider investing in:
|
Name |
Ticker |
Market Cap |
Specialization |
|
SoFi Technologies |
SOFI |
$8.41 billion |
Student loans |
|
Block |
SQ |
$38.11 billion |
P2P payments |
|
PayPal |
PYPL |
$65.89 billion |
Digital payments |
|
Robin Hood |
HOOD |
$9.78 billion |
Stock trading |
|
Discover Financial |
DFS |
$26.26 billion |
Credit cards |
While digital banking is still in its early years, these companies have already become established players in the industry. Each offers unique services and is well-positioned for future growth.
SoFi Technologies Inc.
SoFi is a popular fintech bank targeting millennials and Gen-Z users. It offers a wide range of financial services, including student loans, brokerage services, banking products, and insurance products through partnerships. SoFi caters to high-income individuals and aims to achieve profitability by fiscal 2024.
Block Inc.
Block, formerly known as Square, is a fintech company that offers various financial services through its Cash App division. It received its banking charter in 2020 and now provides consumer financial services such as debit cards, FDIC-insured checking accounts, P2P funds transfers, and payment processing. Block has also expanded its offerings through partnerships, including buy-now-pay-later services.
PayPal Holdings Inc.
PayPal is a globally recognized fintech company that offers a wide range of financial services, including working capital loans and credit cards. While it does not have a banking charter, PayPal provides select banking services through partnerships with regulated banks. It has a large user base and operates in over 200 countries.
Robinhood Markets Inc.
Robinhood is an online brokerage platform that popularized zero-commission stock trades. It has expanded its offerings to include banking services, such as cash management accounts and a debit card. While it does not have a banking charter, Robinhood has partnered with FDIC-insured banks to provide certain services.
Discover Financial Services
Discover Financial Services is known for its credit card offerings but has also diversified into online banking services. Discover Bank offers various accounts, including savings, checking, money market, certificates of deposit (CDs), and IRAs. It promotes competitive savings interest rates and has a seamless online banking experience.
Fintech: In its Early Years
Fintech banking is still in its early stages, with significant room for growth. While some fintech banks promote $2 million FDIC insurance coverage, it’s important to note that the FDIC only insures up to $250,000 per depositor per bank. Investing in fintech banks can be a good long-term strategy for risk-tolerant investors who want to stay ahead in the rapidly evolving financial industry.
