Top 3 Fintech Stocks to Buy In 2022

The fintech industry has seen rapid growth in recent years and shows no signs of stopping. Fintech is present in our everyday lives, whether we realize it or not. From sending money to your friends online to paying for a car ride using your wallet app, fintech is here to stay.

According to the Global Fintech Adoption Index, the fintech industry grew by a massive 48% between 2015 and 2019. Experts are also forecasting the global fintech market will be worth up to $190 billion by 2026, with a compound annual growth rate of more than 13%.

In this article, we’ll give you an introduction to the fintech industry and list the top 5 best fintech stocks in the current market to consider for your portfolio.

What does Fintech mean?

Fintech is short for finance and technology – a broad term referring to any business that uses technology to streamline and improve various financial services. 

For example, Kabbage, a fintech giant, leverages Big Data and advanced, sophisticated algorithms to let users make instant lending decisions and loan each other money digitally (P2P lending) without the need of a traditional financial institution. In other words, Kabbage uses technology to simplify and enhance the lending process. 

Another example is smartphone apps that use near-field communication (NFC), quick reference (QR) codes, or barcodes to initiate in-store payment instead of a physical credit/debit card or gift card. Apple Pay and apps from merchants like Starbucks are among the most popular apps in this category.

See also: How Digital Transformation Affects the Future of Accounting.

Different types of Fintech 

As fintech is an umbrella term – any business can represent fintech as long as they use technology to improve financial processes. That’s why fintech can be found in a wide range of sectors, from HR & Payroll to eCommerce & Marketing. 

Source: S&P Global 

See also: What Is The Future Of Fintech And Why Businesses Should Not Resist.

3 Best Fintech stocks to buy in 2022 

There’s a wide range of fintech companies to keep an eye on and invest in. Just remember, investing is a long-term game and you might see your stock swing significantly along the way. 

Below are the top 3 fintech stocks that you should consider buying:

Visa Inc. (NYSE: V)

Visa is the world’s leader in digital payments and one of the biggest fintech companies. Visa is not a traditional bank – it does not issue credit or debit cards. It’s a payment processor, providing the network between the bank issuing the card and the merchant accepting that card as payment. In return, Visa receives a fee from every transaction that takes place on its network in exchange, resulting in billions of dollars in profit and revenue each year.

According to Visa’s 2021 shareholder letter, the company expanded its reach to more than 80 million merchants, a 14% rise. Visa has also invested more than $9 billion in technology over the last five years and continues to do so to ensure that its users are comfortable and secure in shopping digitally.

Paypal Holdings, Inc. (NASDAQ:PYPL

PayPal Holdings (NASDAQ: PYPL) has become a household name for online payments over the last two decades. It has more than 400 million users in more than 200 markets all over the world. More importantly, PayPal’s peer-to-peer mobile payment service Venmo has grown into an industry leader and continues to expand its massive user base at an incredible pace. In 2022, PayPal is launching Pay With Venmo on Amazon.com Inc.’s (AMZN) platform. This partnership comes as online purchasing activity has skyrocketed during the worldwide Covid-19 pandemic, with 47% of Venmo users expressing interest in paying with Venmo when checking out with merchants, according to Venmo’s Behavior Study.

Logan Purk, a senior research analyst at Edward Jones, says, “It’s likely they will continue to deliver on their long-term growth algorithm, which is 20%-plus growth, which we think over time results in fairly attractive returns for shareholders.” He continues, “PayPal continues to expand its services such as peer-to-peer payments, Venmo, crypto, and buy-now, pay-later,” which will definitely strengthen PayPal’s position in the Fintech space.  

See also: PayPal vs. Stripe: Which Payment Solution is Best for Your Small Biz?

Intuit Inc. (NASDAQ: INTU)

Have you ever used TurboTax to file your tax return? 

Intuit owns TurboTax and other financial software like Quickbooks, Mint, and Credit Karma. This company is listed as one of our top picks due to its established customer base and rapid growth. The company’s revenue increased to $2 billion in the most recent quarter from $1.3 billion just a year ago, and it expects to reach $12 billion in 2022, equivalent to a 26% to 28% increase. Intuit has been striving to build a complete and perfect platform for SMEs businesses, streamlining complex and lengthy accounting processes. 

Another fintech tool (not a fintech stock) that can also help you transform your accounting and financial process digitally is Shoeboxed. Shoeboxed is an online receipt scanner app that allows you to turn your stacks of paper documents into digital with just a click. AI-powered technology automatically extracts and categorizes important data from your receipts. Fast and secure, Shoeboxed is the best option to digitize your accounting procedures. 

Final thoughts 

The COVID-19 pandemic caused a permanent shift to digital preference in almost every aspect of life, especially in banking and payments. 

Fintech companies have grabbed this opportunity and shown robust growth, promising a bright and fruitful future for fintech stocks investors. 

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What’s Net Cash Flow and How Do You Use It?

If you want to know how money is being utilized within your business, you can look at your net cash flow. It depicts the cash inflows and outflows of your business in a given period. 

But how this metric is calculated? Why is it important to a business? Is it the same thing as net income? These are some commonly asked questions that you too may have about cash flow. In today’s article, we’ll walk you through it!

What is net cash flow?

Net cash flow is a metric that tells you the amount of money that comes in or goes out of your business within a specific period of time. This metric also represents the amount of money produced or lost by a business during a given period. If more cash comes in, the result would be a positive cash flow. On the other hand, your business may see a negative cash flow if more money goes out than comes in. 

Net cash flows can be found in the statement of cash flows. Alternatively, you can determine the amount by calculating the changes in cash balance stated in the balance sheet over two different periods.

Net cash flow is generated through three main activities: operating activities, investing activities, and financing activities. As a result, it’s the aggregate of cash inflows and outflows from these three activities. 

  • Cash from operating activities (CFO): This is the money generated from the business’s core operations. Cash from operating activities comprises funds from operations and changes in working capital. Funds from operations include net incomes, depreciation (an expense converted from a fixed asset as the asset is used during normal business operations), deferred taxes (taxes that are owed but are not due to be paid until a future date), and other funds. Working capital involves current assets and liabilities (accounts payable, account receivable, etc.)
  • Cash from investing activities (CFI): This is the net cash generated from sales and purchase of equipment and assets (tangible or intangible) and any other capital expenditure for core operations. It also includes the movement of cash due to investments made outside the company like investing in other businesses, stock market, etc.
  • Cash from financing activities (CFF): This is the net cash generated from the procurement and repayment of short and long-term debt, issuance of equity, purchase/sale of treasury stock, payment of dividends, etc.

See also: What You Need to Know about Operating Cash Flow Ratio

The net cash flow formula

So, how do you calculate net cash flow? Just use this formula:

Net Cash Flow = Net Cash Flow from Operating Activities + Net Cash Flow from Financing Activities + Net Cash Flow from Investing Activities

It may look complicated, but it’s really simple. Take this real-world example, for instance:  

Company A has a cash flow from operating activities of $90,000 and a cash flow from investing activities of $30,000. However, Company A also has to pay a loan repayment of $20,000, which results in a cash flow from financing activities of -$20,000. 

How can you calculate the net cash flow for Company A? Apply the formula above, and it will look like this:

Net Cash Flow = $90,000 – $20,000 + $30,000 = $100,000

This means that Company A has a $100,000 net cash flow over the given period. A positive cash flow indicates that the financial health of company A is relatively strong. They’re going on the right track, and if they keep up the good work, chances are they’ll be able to grow quickly. 

Why is net cash flow important? 

Net cash flow serves as a gauge to determine your business’ liquidity. As a result, it gives business owners like you insight into the business’s financial health. Having a positive cash flow is a good sign meaning that your business is thriving. On the other hand, having a negative cash flow might indicate that your business is facing trouble.

With that being said, sometimes, a negative cash flow isn’t necessarily a bad sign. For example, if you’ve recently invested a significant amount of money into new equipment, this could lead to a negative cash flow for a period. However, it would boost up your productivity and bring you higher revenue in the future. 

But, as a rule of thumb, positive cash flow is more likely to reflect positive business performance. Positive cash flow opens up opportunities such as being able to invest in research and development or hiring more employees. On the other hand, a negative cash flow may limit your business’s growth. Consequently, you must figure out ways to improve cash flows.  

Is net cash flow the same as net income?

Technically speaking, they aren’t the same. Net income demonstrates the effectiveness of a company’s sales and marketing, resulting in sales volume, while cash flow is more of a liquidity indicator.

Your business can have a high net income but still post a negative cash flow. This is because your income generally considers accounts receivable, but cash flow doesn’t. For example, assume you made a sale for $5,000, but you let your customer pay in 5 months. As a result, the cash flow you gained from the sale would be $1,000 for this month, whereas your income is recorded as $5,000 if your company adopts the accrual accounting method. 

How can you manage cash flow?

As we mentioned above, the net cash flow is the total cash from operating, investing, and financing activities. In contrast to investing and financing activities which may be one-time or sporadic revenue, the operating activities are core to the business and are recurring every month. As a result, this is the main source of most of a business’ money. 

So, if you want to manage your cash flow more effectively, start with cash flow from operating activities. Since cash from operating activities is mainly generated through the sales of goods or services, monitoring your transactions daily will help you better control the cash flow. 

It’s a good practice to match the cash inflow from the sales with sales receipts incurred in a day everyday. By doing so, once you identify a mistake has occurred, you can quickly take action to rectify the issue. It can be less stressful as well. 

Even if you’re a small business, you can generate scores of sales receipts per day. It could take up lots of time if you have to manually calculate all the cash transactions made in a day and cross-reference it with the actual cash you receive.  

To save your time and effort, switch to bookkeeping software that can automatically calculate and make reports out of your receipts. A great software for this is Shoeboxed. All you have to do is get your receipts scanned, stored, and organized. Shoeboxed will make a report out of it for you. 

The bottom line

Net cash flow shows you the bigger picture of your cash inflows and outflows. It lets you know how your business is doing and whether you need to make any changes to it. If you have a positive net cash flow, you’re likely on the right track. On the other hand, a negative cash flow means you may need to reevaluate your strategies.