This Is Why Wall Street Is Embracing Fintech

This Is Why Wall Street Is Embracing Fintech

As anyone who is following the fintech revolution knows, companies offering alternative financial services are thriving for many reasons. Primarily, they provide a degree of convenience that traditional financial institutions often can’t match.

That’s why Wall Street is starting to take notice. While this blog is by no means offering investment advice (you should consult with a personal financial advisor if that’s what you’re looking for), it will cover yet another milestone in the fintech revolution.

More financial experts have begun to recognize the value that fintech startups offer. Developments like these should further put to rest any lingering doubts or skepticism that people may have regarding the future of this industry. Fintech is here to stay.


Major Names on Wall Street Voice Support for Fintech

Morgan Stanley is one of the most recognizable names on Wall Street. When the brokerage endorses an industry, it’s worth paying attention.

That’s why a recent research note from Morgan Stanley’s analysts is particularly interesting. The note upgrades the payment and processing industry (a key fintech subsector) to attractive. Analysts at Morgan Stanley believe that companies in this sector are likely to grow earnings organically at an average rate of 15% through 2020.

There are a few key reasons why analysts predict growth in the years ahead. First, consumer spending habits have remained consistent enough for these companies to make money. Many businesses in this sector are also expanding their services in order to attract customers conducting business-to-business transactions. Analysts also point out that trends indicate a natural shift away from cash as more consumers embrace electronic payment options. These points all explain why there’s good reason to believe that payment processing companies will continue to thrive.

Morgan Stanley is not unique in its endorsement of fintech. Other major names on Wall Street have also begun to voice their support.




Bloomberg reports that Paul Condra, an analyst for Credit Suisse, recently wrote a note that states, “Amid volatile market conditions, our fintech universe has been a relative safe haven year-to-date, outperforming the S&P 500 and both financials and tech… We believe sentiment toward the space remains largely positive given the potential for continued growth, margin expansion, cash return, M&A, and a relatively defensive posture.”

Wolfe Research, one of Wall Street’s leading research firms, also appears to be backing fintech more directly than it has in the past. Managing Director Darrin Peller states that technology has won the “battle for direct access to the consumer.” Peller argues that fintech will continue to grow and thrive as banks partner with startups.

Peller’s beliefs are backed up by clear facts. For example, Bank of America recently announced that mobile deposits have overtaken in-branch deposits, indicating that customers are more attracted to fintech-based services.

It’s also worth noting that on a recent episode of Mad Money, Jim Cramer pointed out that fintech-based payment processing companies are performing well in the market, giving everyone even more reason to accept that customers are pleased with the convenience they offer.


What All This Means

Again, it’s important for readers to understand that the information provided here should not be viewed as an endorsement of fintech stocks. While they appear to be performing well, it’s important to undertake proper research and to consult with a financial professional before making an investment.

Instead, this information serves as one more reminder that the fintech revolution is not a bubble. These companies and their products succeed because they fulfill a genuine need for their customers. The fact that the experts on Wall Street believe they’re primed for major growth demonstrates that this is the case. So does the fact that many fintech stocks are performing strongly.

Anyone interested in this topic should continue to follow these developments to find out if more firms on Wall Street join in the chorus of support for fintech. Those who work at traditional financial institutions should be particularly vigilant about listening to what Wall Street has to say about the issue.

Analysts at these firms make a living by identifying which industries are most likely to grow and thrive in the future. If several of them recognize fintech in this manner, it implies that the traditional financial services industry will need to adapt in order to survive. As this blog has pointed out before, there’s one way to do that: partnering with fintech companies. When new startups and established banks work together, everyone wins.

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