Public fintechs outperforming a record stock market

Even as the U.S. stock markets reach new highs seemingly every week, fintech stocks are outpacing them. F-Prime ’s Fintech Index, which tracks publicly listed disruptive fintech companies, is up 42% year-to-date — far outpacing the S&P 500 (+10% YoY) and Nasdaq (+12% YoY), Abdul Abdirahman , a principal at the Cambridge, Mass.-based venture capital firm, told Bank Automation News. [caption id="attachment_57364853" align="alignright" width="300"] (Courtesy/Bloomberg)[/caption] Fintechs’ superior performance goes beyond a generalized “everything rally” of 2025 for several reasons, Abdirahman said. It “reflects sector-specific strength and underlying business improvements, not just broader market correlation,” he said. “Even within tech, fintech stands out,” Abdirahman said. “The broader cloud software index, for example, is down about 11% year to date, reinforcing that fintech gains are not just part of a techwide surge.” The index’s top-weighted fintechs — including PayPal , Nubank , Shopify and MercadoLibre — have posted strong earnings and raised their guidance, signaling growth that has been reflected in their share prices, he said. Fintechs are also outpacing the broader market in revenue expansion, with gross margins comparable to those of large-cap tech firms, Abdirahman said. Stock of securities trading platform Robinhood , for example is “up about 180% year to date, backed by a 45% jump in revenue and a swing to 39% net margin in the latest quarter,” he said. “ SoFi stock is up about 70% year to date on the back of 43% year-over-year revenue growth while improving gross margins to around 70%.” IPOs, de-SPACs While public fintechs are seeing share prices soar, many more fintechs are hoping to go through an IPO, Abdirahman said. “Heading into 2025, IPO markets showed signs of reopening,” he said. “However, macro uncertainty and tariffs caused delays.” Fintechs Klarna and Plaid have shelved IPO plans amid an uncertain macroeconomic environment, according to BAN ’s prior reporting. In general, fintechs are not exploring the option of going public through a special purpose acquisition company (SPAC) or “blank check company,” as was common in 2020 and 2021, Abdirahaman said. Fintechs including SoFi, Payoneer , BillTrust and WeBull hit the public markets through SPACs since that time. “The focus has shifted back to traditional IPOs for scaled players,” he said. “I think the underperformance of de-SPAC companies in 2021, the negative sentiment from investors, misaligned incentives and regulatory scrutiny make this route less attractive to high performing fintechs and prospective public market investors.” Many late-stage fintech startups such as Stripe , Ramp and Revolut remain well-funded privately and may continue raising capital in private markets, opting to avoid the scrutiny of being publicly listed, he said. M&A On one hand, elevated share prices give public fintechs stronger acquisition currency to make acquisitions, but on the other hand, high valuation expectations may tilt the build-versus-buy decision toward internal development, Abdirahman said. “Over the past few years, we've seen some consolidation as well-capitalized fintechs acquired smaller or distressed peers to expand market share or broaden their product offerings,” he said. While acquiring banks remains an option , such transactions generally face greater regulatory scrutiny and longer timelines, making fintech-to-fintech M&A more probable in the near term, he added. M&A deals announced this year include : Payments provider MeridianLink was acquired by private equity company Centerbridge for $2 billion in August; B2B payments company Rail was acquired for $200 million by crypto exchange platform Ripple in August; Payments company DTS Connex was acquired by Fifth Third Bank in August for an undisclosed amount; Crypto company Bitstamp was acquired for $200 million by Robinhood in June.

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