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Fintech Is Booming, Here Are Some Numbers

This week Techcrunch reported that Monzo, a pre revenue Fintech company  raised $144.4 million dollars at a +$1 billion valuation.

Monzo deems itself ‘the bank of the future.’ Monzo is taking advantage of the current dire situation the banks face. We have previously written how we think the big banks will continue to suffer unless they fix a handful of looming problems that are worsening year over year. Fintech companies have sought to fix many of these problems that the big banks are ignoring.

According to Techcrunch:

Monzo, the U.K. challenger bank that now boasts more than a million customers, has raised £85 million in Series E funding. The round is led by U.S. venture capital firm General Catalyst and Accel. Existing backers Passion Capital, Goodwater, Thrive Capital, Orange Digital Ventures and Stripe also participated. The latest funding was at a pre-money valuation of £1 billion (~$1.27b), meaning that Monzo  is now a bona-fide member of the U.K. fintech unicorn club, joining recent entrant Revolut.

VC funding into fintech companies has been a huge trend over the last decade:

The total transaction value in FinTech is continuously rising, going from $2,066,139.80 in 2015 to $3,300,958 in 2017. FinTech market transaction value is set to grow 20 percent a year to $7 trillion in 2021. Digital payments, the largest segment, will be worth $2.7 trillion according to Statista.

 

Success Creates Apathy

Traditional big banks (especially in Canada) have had a dominant position for decades as there are only a handful of options for consumers to choose from, but is that really true? Since the recent tech boom a handful of financial services have come into the market, making it more and more difficult for the big banks to retain business and attention.

Big banks have built flimsy outdated apps that their customers don’t like, and have not kept up to date with the fast paced technological advances. In their case, success has created apathy and their position at the top made them fall asleep to the burgeoning movement happening in society.

One of Monzo’s investors said:

‘Today’s incumbent UK banks represent billions of market cap but suffer from low NPS scores, reflecting their inability to meet their customers’ needs.”

 

Mogo: The Undervalued Fintech Stock

We believe Mogo (MOGO.Q) is an extremely undervalued company. Digging into their numbers for a minute, they have over 700,000 users, have seen a 64% revenue growth and did $15 million in revenue in Q2 2018 and have $130 million in assets, $31 million of which is cash, giving them a healthy runway to continue to scale.

 

Their revenue breakdown was:

  • $5.7 million in subscription fees
  • $5.8 million in interest revenue
  • $3.8 million in loan fees

Mogo offers 6 revenue generating services:

Canada’s first free credit monitoring solution – knowing your credit score is the first step to being financially fit and can help you on a path to accessing the best credit rates.

MogoProtect – Digital solution designed to help protect you against identity fraud. At $8.99/month, MogoProtect is the lowest cost identity fraud solution in Canada with real time alerts notifying you of hard credit checks on your Equifax bureau through a mobile app.

MogoCard – Control your spending and set your savings goal with Canada’s first digital spending account with a free Mogo Platinum Prepaid Visa® card.

MogoCrypto – Invest in bitcoin through Canada’s first and only mobile solution that allows members to buy and sell through an app without any funding or withdrawal fees.

MogoMortgage – Buy a home and focus on getting mortgage free. Mogo is the only mortgage broker in Canada offering the ability to track your mortgage within a mobile app.

MogoMoney – Access smart credit if you need it. MogoMoney is Canada’s digital loan solution with a “Level-up” program that rewards consumers for consistent payments and Mogo is the only consumer finance company offering the ability to track your loan through a mobile app.

 

Compared to Mogo’s competitors, this an attractive investment.

Company Share Price EV / Revenue
Multiple
Revenue Growth
Mogo $2.83 1.8 59%
PayPal $86.68 5.3 17.90%
Intuit $227.62 8.4 16.70%
Square $97.83 18.3 57%
Shopify $156.60 10.6 53.50%
Zillow $42.07 4.1 45.40%

 

In today’s market finding a company whose annual revenue matches its market cap is like finding a diamond in the rough.

In hot sectors like blockchain, cannabis and tech it’s become commonplace for pre revenue companies to have marketcaps in the billions. The Vancouver based fintech company Mogo (MOGO.Q) is that diamond in the rough as they generated $15.4 million in revenue last quarter with a market cap of $59.3M.

 

Disclaimer: Mogo is a paid client of High Energy Trading, click here to read full disclosure.

High Energy Trading is not a licensed broker-dealer, market maker, investment advisor, or underwriter. All information that we provide is for informational purposes only and should not be construed as an offer or solicitation of an offer to buy or sell securities.

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