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Buoyed by the rise of remote work and digital transformation, the fintech industry has experienced exponential growth in the wake of the Covid-19 pandemic. Amidst growing revenue
Although markets have suffered in recent months from the onset of record-breaking inflation rates, lingering concerns regarding the pandemic, and the emergence of fresh geopolitical tensions involving Russia, many stocks have experienced bounces following recent downturns, helping to restore much investor optimism in a prosperous Q2.
With this in mind, Maxim Manturov, head of investment advice at Freedom Finance Europe (Freedom Holding Corp. (Nasdaq: FRHC), is on hand to discuss three of the most exciting prospective IPOs within the fintech sector for 2022:
Inside an industry ready for further growth
Despite its status as an emerging technology, fintech is changing finance management all around the world. For instance, in the UK, traditional banking institutions have opted to close brick and mortar branches throughout the country as the pace of digital transformation has made it possible for users to comprehensively manage their money via smartphone applications.
Whilst in Brazil, we’ve seen Nubank open up fresh opportunities for individuals to send and receive remittances digitally throughout Latin America.
Data suggests that the adoption of fintech has grown rapidly since around the time of the arrival of the Covid-19 pandemic, with the number of daily active users of fintech products like apps and websites increasing by more than 300% in a matter of months.
Although many fintech services have been adversely impacted by the record-breaking rise in inflation rates globally, it’s highly unlikely that we will see a reversal of such adoption trends.
This makes 2022’s IPO market particularly exciting for retail investors who may be seeking opportunities to buy into innovative fintech firms. Let’s take a look at three of the biggest arrivals set to launch their IPOs in 2022:
1. Klarna
Buy-now-pay-later platforms are nothing new, but endeavors like Klarna pack enough technology to offer consumers a slick, automated credit service that can pave the way for instant loans granted at the checkout to be paid back over various timeframes.
Klarna’s business model is strong because the company can receive different forms of revenue – the vast majority comes from the retailer, which pays merchant and interchange fees, and there are also potentially further payments from the customer, who may pay fees for missed or late payments.
The company saw its gross merchandise volume climb by 42% in 2021 over the year prior, whilst the company’s revenue rose by 38%. Klarna states that it has almost 150 million customers spanning 45 countries worldwide.
With the news that Klarna is also set to expand its ‘pay now’ program to more markets, as well as the prospective introduction of rewards for customers who make payments on time, adoption rates may be set to grow long into the future.
The company is reportedly mulling over a 2022 floatation at an estimated valuation of nearly $50 billion. At such a high valuation, some retail investors may be wary of buying into the stock, but in an industry that’s already begun to grow so rapidly, there’s certainly scope for further upside.
2. Chime
Since launching in 2021, Chime has become one of the world’s fastest-growing fintech platforms in the United States. The company operates a fully mobile banking platform that provides many of the services that traditional banks offer without the need for visiting any physical locations like branches. Chime also offers current accounts without any monthly fees to be paid.
When it comes to working out what a Chime IPO’s target valuation would look like, the company’s financials would need to be examined to determine just how quickly it’s growing. However, just three years ago, Chime was valued at $1.5 billion, and the IPO potential valuation was maybe $40 billion, whilst the last valuation was $25bn – suggesting that Chime has managed to take away a significant market share from traditional banks.
3. Stripe
Stripe’s IPO is likely to be one of the most hotly anticipated of 2022. The company saw its revenue climb to almost $7.5 billion back in 2020, according to Wall Street Journal figures – representing a 70% jump on the year before. The company also processed $350 billion in transactions according to CB insights, and has a reach of nearly 50 countries.
The company has also acted fast in embracing digital transformation trends, and has leveraged online purchases at hundreds of thousands of companies since the beginning of the pandemic. 2020 saw digital purchases jump as much as 32%, whilst reverting more to a pre-pandemic growth rate in 2021.
Whilst Stripe’s IPO is expected in 2022, the company is also aware of the difficult market conditions that’s impacting the performance of initial public offerings in 2022. As inflation has led to investor sell offs in the fintech company sector, Stripe’s listing may come in below its latest $95 billion investor price. This can be seen in one shareholder, Fidelity, adjusting the value of its investment in stripe by 9% to account for the sell-off in the tech company market.
These difficult conditions are likely to impact all fintech IPOs to varying extents in 2022. However, investors who are more optimistic about the future of fintech and the wider market recovery from the impact of inflation may see the more modest prices of listings as an opportunity – after all, consumer faith in fintech is only continuing to grow.
