The biggest FinTech companies have been rising in valuation faster than the largest banks, seeing a total of more than $1 trillion now, according to CNBC.
Between Square, Visa, PayPal and Mastercard, the valuation is currently sitting at $1.07 trillion, against the “big six” banks — J.P. Morgan, Bank of America, Wells Fargo, Citigroup, Morgan Stanley and Goldman Sachs — which have less than $900 billion between them, CNBC reported. The banks' shares have taken a hit as of late with low interest rates and fears of spiking loan defaults amid the pandemic.
The ETFMG Prime Mobile Payments ETF, tracking mobile payments stocks, has seen a 10 percent jump this year. The Financial Select Sector SPDR Fund, meanwhile, has fallen almost 20 percent, CNBC reported.
The surge in value for FinTechs comes this year amid the pandemic, with tech companies being the darlings of investors as people adapt to a hyper-digitized purchasing landscape. Additionally, payment companies have been foraging into more traditional banks over the years, which has also attracted investors.
Square, for instance, recently announced it would be letting Cash App users access wages earlier than usual, which could be an incentive for users to sign up for direct deposit through the app. PayPal's Venmo also allows users access wages early.
The pandemic's shutdown orders, issued in real time in March of this year, triggered a chain reaction of rapid digital transitions for people who hadn't expected it. Seventeen percent of senior citizens, for example, were using smartphones to access financial accounts in June.
As the ages go down, the amount of people using digital consumer products just keeps going up, PYMNTS reported. Ondot Systems Vice President of Customer Success Balu Kikkeri said it's the highest proliferation of digital banking customers to date. Kikkeri said newer FinTechs have been putting the pressure on long-term financial institutions through showing the levels of convenience and simplicity possible in transactions.