3 Fintech Stocks Positioned to Capitalize on the Digital Banking Revolution

The financial technology sector continues to reshape how consumers and institutions manage money. While fintech itself is no longer novel, the ongoing digital transformation presents compelling opportunities for investors willing to look beyond current market sentiment. Here’s a detailed analysis of three stocks worth considering.

The Mobile-First Banking Opportunity: SoFi Technologies

Digital banking adoption has reached a critical inflection point. According to recent data from the American Bankers Association, over half of U.S. bank customers—54% as of October—now rely primarily on mobile apps to manage accounts. Another 22% prefer web-based banking, while only 9% visit physical branches. This shift represents a fundamental change in banking behavior, particularly among younger demographics who will only deepen this trend as they age.

SoFi Technologies (NASDAQ: SOFI) represents a pure-play on this transformation. Unlike traditional banks retrofitting digital services, SoFi was architected from the ground up as an online-first institution. The results speak for themselves: customer growth has been consistent, expanding from 704,000 in early 2019 to over 12.6 million today—a remarkable expansion across consecutive quarters.

Yet this penetration barely scratches the surface. The U.S. has approximately 260 million digitally-native adults, while most SoFi customers maintain fewer than two product relationships with the platform. Cross-selling opportunities remain substantial.

Revenue Growth Amid Market Pessimism: PayPal

Few companies have endured such a disconnect between fundamentals and valuation as PayPal (NASDAQ: PYPL). The stock’s decline since its 2021 peak has bred pessimism, with investors pricing in threats from cryptocurrency alternatives, rising competition from traditional banks and fintech rivals, and the maturation of payment networks.

However, the narrative doesn’t align with reality. PayPal is tracking toward another record revenue year at $33.3 billion, with profitability approaching 2021 levels. The company maintains approximately 50% of the global online payments market—market share that has remained remarkably resilient despite competitive pressures.

Analyst consensus projects continued growth trajectory: the company is forecast to generate $41 billion in revenue by 2028, converting it into $5.8 billion of net income. At less than 10x this year’s projected earnings per share of $5.79, the stock trades 24% below consensus price targets. If and when the investment community reconciles current valuation with forward projections, the upside potential becomes substantial.

AI-Powered Credit Assessment: Upstart Holdings

Credit scoring represents a fragmented market ripe for disruption. Traditional players like Equifax and TransUnion have deployed incremental technological improvements, but Upstart (NASDAQ: UPST) represents what a ground-up credit solution looks like in the modern era.

Founded in 2012 by former Google executive Dave Girouard, computer scientist Paul Gu, and entrepreneur Anna Counselman, Upstart deployed artificial intelligence algorithms to reassess borrower creditworthiness. The platform delivers measurable outcomes: 43% more loan approvals with no increase in defaults. Over 90% of approvals operate fully automated, reducing friction and costs throughout the lending ecosystem. This efficiency has attracted more than 100 institutional lenders including banks and credit unions.

The stock has experienced volatility since its 2020 IPO, but this reflects the platform working as designed. When economic headwinds appeared mid-2024, the algorithm appropriately signaled caution, reducing approvals and protecting lenders during periods of uncertainty.

Recent performance improvements validate the business model: through the first three quarters of 2024, total loan volume processed more than doubled, while conversion rates improved from 15.3% to 21.2%. As market participants recognize that Upstart’s business has reached an inflection point, valuation reappraisal becomes increasingly probable.

The Bottom Line

These three fintech stocks represent different angles on financial technology’s evolution. Whether through banking infrastructure transformation, payments market resilience, or artificial intelligence applied to traditional finance, each offers distinct catalysts for outperformance.