If there is one thing the Canadian tech space has been known for over the last few years, it is the development of some of the top fintech startups in North America.
If you look at some of the most rapidly growing companies on the TSX, there is a good chance they're a payment processor/fintech-style company.
Many looking for high-growth Canadian stocks will turn to a fintech company. Have the returns dried up with the significant correction, or are these stocks set to provide marketing-beating returns moving forward?
Fintech, and Canadian fintech stocks, aren't going anywhere anytime soon
Financial services are one of the largest sectors in Canada, and technology is not only making it much easier to lend, but it's also making online transactions much more accessible.
We're seeing next-level growth from many top Canadian fintech stocks in terms of gross transaction volumes as they help businesses reach customers easier and process transactions smoother, despite the impending recession.
We're also seeing Canadian banks utilize fintech to drive more extensive deposits and fuel customer additions.
Although the cryptocurrency aspect of fintech takes up most of the spotlight, the significant money is still within the financial sector, where things like payment processing, money transfers, and instant cheque deposits fuel the fintech market.
As such, there is a high likelihood that the fintech sector will not only grow but grow rapidly over the next 10-20 years as technology continues to evolve at an astonishing pace.
As more and more companies penetrate the space, we will likely need to see significant financial institutions here in Canada, like TD Bank and Bank of Montreal, either adapt or be left in the dust.
We've decided to publish a piece on some of the top Canadian fintech stocks to buy.
Let's review these Canadian fintech companies, some of which had an extremely contrasting experience compared to Canadian travel stocks through the worst Covid-19 pandemic.
What are the top Canadian fintech stocks to buy?
- Nuvei (TSE:NVEI)
- Shopify (TSE:SHOP)
- Lightspeed Commerce (TSE:LSPD)
Nuvei Corporation (TSX:NVEI)
A relatively new company on the TSX, Nuvei (TSE:NVEI) underwent its initial public offering in August of 2020, and despite a massive drawdown in the share price through 2022 and 2023, the company has had considerable success.
What exactly is Nuvei? The company is a payment processor offering mobile, online, and in-store payments to its merchants and partners.
Even though this is a Canadian-listed fintech stock, it derives most of its revenue from the United States. Also, it has exposure in other parts of the world, such as the United Kingdom.
The tech company supports over 500 payment methods, 150 currencies, and 40 cryptocurrencies, allowing its merchants to capture more revenue by providing more diversity for their customers and their transactions.
The company has partnerships with major credit card companies such as American Express, Mastercard, Visa, and Discover. The vast majority of its total sales volume comes via eCommerce. This sector is not slowing down anytime soon.
Since 2018, the company has grown revenue fivefold, closing out Fiscal 2022 with just over $1B. It states its total addressable market is somewhere in the range of $20 trillion. For those just learning how to buy stocks we must take TAM with a grain of salt in most situations. But, even if it were to be just a fraction of this, it would set Nuvei up for explosive growth.
The company has a sound strategy of first developing its global footprint before expanding outwards and seeking strategic mergers and acquisitions.
Overall, this is a relatively young fintech company. Still, analysts expect it will post significant growth over the next few years despite the challenging economic environment, with mid-double-digit growth in revenue and earnings.
It would be hard to make an article about the top Canadian fintech stocks without including arguably the most successful Canadian stock of all time, Shopify (TSE:SHOP). And for some who are out of touch with Shopify's recent moves, you may not think this is a fintech stock. However, it very much is.
At first, the company launched as an eCommerce platform that allowed merchants to sell to their customers.
The point of Shopify's platform was to make it as easy as possible to get a shop up and running and generate revenue. And during the pandemic, this proved to be critical.
However, the company has evolved into much more than that. Now, the company offers fintech services to drive more revenue for its merchants and, ultimately, for itself. Innovations like their debit cards, buy now pay later systems, and business funding from Shopify Capital have vaulted the company into the space, and it's currently growing at a lightning-fast pace.
As mentioned, the pandemic fueled growth for Shopify exponentially, as it recorded triple-digit increases in revenue. However, after the pandemic, the company even admits they overshot growth targets extensively. This resulted in a significant reduction in share price, which is ultimately good for prospective investors.
Not only did vendors find Shopify's subscription and merchant tools well worth the subscription cost, but they also found it accelerated revenue to the point where operating both a brick-and-mortar and an online business or strictly transitioning to online was a no-brainer. This will fuel long-term growth for Shopify.
With the company's track record in terms of new products and innovations, there's almost no doubt it will be a dominant force in the Canadian fintech industry moving forward.
Lightspeed Commerce (TSX:LSPD)
Once named Lightspeed POS, or Point of Sale, Lightspeed Commerce (TSE:LSPD) rebranded itself in mid-2021 to more accurately represent what this company is setting out to do, and that is to become a larger player in the Canadian fintech space.
The company has been mired in issues lately, none of which are due to its performance.
Headwinds such as supply chains, payment tech selloffs and a valuation reset are causing its price to dip.
However, this is still a company that is set to post significant growth in the future.
So what exactly does Lightspeed do? The company provides omnichannel commerce SaaS (software as a service) platforms. The company's software allows customers to engage with its consumers, manage their operations, accept payments and provide a suite of tools to grow their businesses.
The company has global exposure, including Canada, the Netherlands, and Australia. However, the bulk of its revenue is generated in the United States. The company serves over 156,000 customer locations and has grown gross transaction volume at a lightning-fast pace.
At the time of writing, the company has nearly $900M on the balance sheet in unrestricted cash, which should allow it to navigate this rough economic environment. Some notable acquisitions as of late have included Ecwid and NuORDER, which, although they came at extensive premiums and were heavily criticized, are expected to drive strong growth for the company moving forward.
Unlike Shopify and Nuvei, Lightspeed is likely a few years from profitability. The company doesn't expect to be profitable until Fiscal 2024. However, investors should be concerned with the growth of the top line instead, as this company's main priority is rapid growth and expansion.
Overall, these Canadian financial technology companies will continue to drive the future
As companies expand into new verticals in the fintech ecosystem, much like Lightspeed and Shopify have, it unlocks new opportunities for Canadians to get exposure to the fintech space. Whether it be payroll, online payments, analytics, e-commerce, or even blockchain, there are many more Canadian fintech stocks.
In this piece, we highlighted 3 of the larger, more prominent ones. If you're interested in exploring others, have a look at smaller cap options like Mogo and Payfare. And, for a crypto option, Banxa Holdings.