Fintech disruptor will benefit from Banking Royal Commission

The US market has big name companies like LendingClub and Prosper (not to be confused with the soon to be listed Australian small business online lender, Prospa) but Australia’s technology stocks are much more modest with lower profiles. A couple of Australian fintechs are starting to look interesting and should be on your watchlist.

Zip Co Ltd provides online credit for consumers and businesses at point-of-sale through brands zipMoney and zipPay. Some of the merchants on the platform include TigerAir, Noni B Limited, Laser Clinics Australia and MyDeal. Zip also owns Pocketbook, a free money management app. The share price is up 15% in a year.

Afterpay Touch Group Ltd provides a platform that allows retail merchants to offer consumers to ‘buy now, receive now, pay later’ without having to enter into a traditional loan agreement. The US market launch through one of the largest lifestyle fashion retailers, Urban Outfitters, has been taken favourably by the market. There is a risk with a price-earnings-ratio of 142x and share price performance of 165% in a year, but the concept is exciting.

Money3 Corporation Limited started out as a a payday lender, which it plans to exit in the next financial year. The company is predominantly involved in providing secured auto loans, which make up around 80% of its loan book. As it leaves behind short term unsecured payday loans, its funding costs are likely to fall, which will also benefit the bottom line as well as the growth in auto loans. The risks are that lending to borrowers who may not be able to get a loan elsewhere, increases the chances of loans defaulting. Not strictly a fintech but the company does offer online loans. Trading on a PER of 10x as well as paying a 4% annual dividend yield.

We're living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

Full article: https://www.fool.com.au/2018/05/19/fintech-disruptor-will-benefit-from-banking-royal-commission/