When the definitive list of late-2010s buzzwords is written, “fintech” deserves a place on the list. This merging of finance and technology attracted $42 billion in global venture capital in 2020, according to KPMG, and sparked 20 initial public offerings in that year alone.

Fintech IPOs around that time were led by cryptocurrency marketplaces such as 2021 IPO Coinbase Global Inc. (ticker: COIN), where investors trade crypto assets whose value remains hotly disputed (and now, Coinbase faces regulatory charges of illegally running an unregistered securities exchange). With that in mind, you might say there are two kinds of fintech investments.

One is the grind-it-out application of information technology to financial services, making the latter more efficient and cheaper to provide (if not necessarily cutting consumer prices). Stocks in this group lack the media hype of the newer fintechs, but they have lower price-to-earnings multiples and much more predictable profits.

Many stocks in the second group can be characterized, not unfairly, as gambles. Many are companies that depend on crypto for part or all of their popularity with investors. If regulatory scrutiny that has produced civil charges in June against Coinbase and closely held rival Binance doesn’t put such operators out of business, and if investors who pushed Bitcoin (BTC) from a 2021 high of nearly $65,000 to below $17,000 in late 2022 (it’s around $25,000 now) decide they like crypto again, they could see these stocks surge.

Some once-hot crypto bets also have other businesses serving non-crypto markets that could support shares if crypto languishes.

If there’s one information nugget that captures the dilemma, it’s that famously aggressive fund manager Cathie Wood’s Ark Fintech Innovation ETF (ARKF) has sports-betting app DraftKings Inc. (DKNG) as one of its top holdings. If you’re going to gamble, you may as well admit that’s what you’re doing.

Here are some fintech stocks to buy from each group. Some may be right for more conservative investors, while others are for risk-preferring types. Just don’t expect miracles from fintech in general this year, as a market skeptical of crypto and under-profitable companies stays in “show-me” mode.

4 Play-It-Safe Fintech Stocks to Buy

The following fintech stocks are solid performers that have proven their mettle through economic downturns:

Fintech stock YTD return as of June 14
Visa Inc. (V) 8%
Intuit Inc. (INTU) 15.1%
Fiserv Inc. (FI) 18.7%
LendingTree Inc. (TREE) 3%

The biggest fintech pure play and one of the oldest, this credit-card processor scrapes a cut off the top of each card transaction – but doesn’t take the risk of whether a card user will repay the borrowed money. Sweet, right?

The key to Visa is whether consumer spending grows – which means it’s a good bet as odds of a U.S. recession seem to be receding, as they have been doing for most of 2023. The stock is up 8% so far this year as of June 14, helped by a second-quarter report that showed payment volumes were up 10% for the three months ended in March, and a key measure of transaction volume gained 32%.

Analysts expect more of the same: Consensus estimates have Visa profits rising about 16% in fiscal 2023, which ends in September, and 14% next year, according to Dow Jones MarketWatch. At 23 times next year’s estimated earnings, it’s not exactly cheap. But if consumer spending accelerates as recession fears fade, it could pay off.

Outgoing Chief Financial Officer Vasant Prabhu told an investment conference in May that Visa’s getting a boost from peer-to-peer payments and value-added services in fraud reduction, which are growing faster than its core business.

“Despite a meaningful deceleration in U.S. spending growth in March/April, the card networks … were generally positive on the health of the consumer and outlook for spending levels for the rest of the year, with no major changes to FY guidance and much of the commentary suggesting that recent weakness should be temporary,” Goldman Sachs analyst Will Nance says.

Two things are certain – death and taxes – and Intuit makes its money from online tax prep, as well as its popular QuickBooks small business software and other products.

The wrinkle that has made the stock a star since 2017 is the acquisition of CreditKarma, which generated $1.8 billion in revenue last year. Operating profit margins are 66%, led by a small but mighty Pro Tax business that converts 83% of revenue into profit. Shares are up 15% in 2023 and have more than doubled since 2018.

Analysts think Intuit’s momentum will continue, forecasting profit of $14.23 a share for the year that ends in July, and $15.77 for fiscal 2024. The wild card is the Internal Revenue Service’s possible expansion of free online tax filing to cover all or nearly all consumers, for which Congress allocated development funding last year. If it comes to fruition, that would threaten Intuit’s $3.4 billion TurboTax business.

Goldman Sachs analyst Kash Rangan argues that the tax challenges can be offset by product improvements driven by artificial intelligence, and moves to use the QuickBooks franchise to capture more business-to-business payments, offering as much as $5 billion in extra annual sales down the road.

“Intuit has multiple years of durable mid-teens-plus growth and 20%-plus profit growth ahead of it,” Rangan says.

It’s hard to find a more boring stock than Fiserv, which has been in the fintech business since 1984, enabling all kinds of back-office work that lets transactions get processed faster and more efficiently. Its stock, up 57% in the last five years including about 18.7% this year as of June 14, never had the price-to-earnings ratio of internet-finance companies during the tech bubble. All it does is make money: An expected $7.37 a share this year, according to Dow Jones data. That produces a relatively modest forward P/E of 15.

“We suspect the durability of [Fiserv’s] revenue and earnings growth prospects could catch some off guard, given its ties to secular payment themes and buffers already built into estimates for a mild recession in 2023,” CFRA Research analyst David Holt says. “Especially when mated to its undemanding valuation.”

There’s no more traditional finance business than getting a mortgage, and LendingTree’s online loan marketplace was once a huge winner, with shares climbing 80-fold between 2011 and 2019. But then the housing market tanked and interest rates rose, taking mortgage origination way down – for LendingTree and everyone else.

The big drop hasn’t been in housing prices – it has been the one-third drop in the number of existing-home transactions that has hammered LendingTree shares since the 2019 peak, and especially since fall of 2021, including an 11% drop this year on lowered guidance. Refinancing also cratered as rates rose.

The good news: If inflation is really whipped, as the drop in 10-year Treasury rates since late 2022 suggests, mortgage rates should fall and housing volumes (and maybe prices) should pop, “Shark Tank” panelist and mega-realtor Barbara Corcoran says. More to the point, millions of people who bought houses since rates began to rise will be in the market to refinance loans that now carry rates around 7%.

Sure, housing looks terrible. It did in 2008 to 2011, too. For patient capital, LendingTree isn’t a bad match of risk and reward. Its low fixed costs will translate a rebound into profits fast. But if rates stay high, it may struggle to repeat its bounce out of the 2000 to 2002 and 2008 to 2010 bear housing markets.

4 Fintech Stocks to Buy That Carry More Risk

Now for the stocks that fall into the riskier camp, but which could pay off down the road for investors willing to roll the dice:

Fintech stock YTD return as of June 14
Coinbase Global Inc. (COIN) 52.3%
Block Inc. (SQ) 1.4%
Shift4 Payments Inc. (FOUR) 16.3%
DraftKings Inc. (DKNG) 121.9%

Coinbase Global Inc. (COIN)

Coinbase is the purest crypto-stock play on this list, down 82% from the aftermath of its 2021 IPO but still up 52.3% so far this year even after the SEC sued the company. The arithmetic is uncertain, but the algebra is clear enough: If Bitcoin and other cryptocurrencies regain and sustain investor favor and generate trading volume, Coinbase will make money. Maybe lots of money, if regulators let it keep operating in any recognizable form, that is.

No one said crypto wasn’t a gamble.

Consider this: Revenue shrank 36% in the first quarter of 2023, but Coinbase’s loss narrowed as the world’s largest crypto exchange cut expenses by almost half. Operating cash flow was actually positive by almost half a billion dollars. That said, the civil case against crypto exchange Binance in early June sent Coinbase shares down by almost 10% in a day.

“The crypto industry continues to be volatile,” Coinbase said in an SEC filing. “While we can’t predict the outcome of these events, we continue to focus on our cost-reduction efforts.”

Block is the prime example of a common phenomenon in fintech: A crypto-light company that isn’t precisely in the business of trading or processing Bitcoin but has a division that is heavily dependent on it, which often drives its valuation.

For Block, previously known as Square, that division is its Cash App service. Within Cash App, about two-thirds of first-quarter revenue came from Bitcoin, according to Block’s federal filing. So while its Square division runs a large payment-processing network, which had almost $1.7 billion in first-quarter revenue, Block is very much in the Bitcoin business, for better or worse.

Block has been an epic stock hit, jumping from $9 at its IPO in 2015 to $275 in 2021 amid Bitcoin mania. It’s been close to flat in 2023, attracting attention from Hindenburg Research, a short-selling shop that zeroed in on Cash App’s regulatory history.

The bottom line on Block: There’s a real business there, in the unit running all those familiar cash-register apps at stores all over. And there’s another on which the jury is still out.

Shift4 Payments Inc. (FOUR)

The Pennsylvania-based payment processor has moved ahead of the similar Toast and Block in some investors’ esteem, recently winning a coveted place on Goldman Sachs’ 22-stock Conviction List of its most confident recommendations. The firm cited Shift4’s successful expansion beyond its base in processing payments for restaurants, and into entertainment and other industries. Key clients now include sports teams such as the Chicago White Sox and Washington Commanders, and the Six Flags theme park empire.

Nance praised Shift4’s relatively modest valuation (30 times his 2023 estimate), sales growth he thinks will double from 2022 to 2025, and strong profit margins that he thinks will widen with the addition of more enterprise clients and less dependence on small restaurants. The stock has risen more than 40% in the last year, and is nearly three times its 2020 IPO price of $23. Next up: A bid to regain its 2021 peak of $101.

Wanna gamble? Become a DraftKings customer. Its stock is a bit of a wager itself. The online betting company generated $770 million of revenue, representing 84% year-over-year revenue growth, and negative $222 million of adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, in the first quarter of 2023.

Analysts estimate the company might be profitable by 2025, and analyst ratings on the stock run the gamut: 17 rate the shares a “buy,” two a “sell” and eight call it a “hold” on TipRanks’ rating service, for example. DraftKings points to improving guidance that portends smaller losses, the ability to contain marketing spending eventually, and the legalization of online sports betting in more of the country.

The big question is whether a 121.9% year-to-date gain has priced all of that into the shares, CFRA Research analyst Zach Warring says. “DKNG sees the total addressable market for mobile sports betting and iGaming at $80 billion in North America, of which we believe DKNG can control about 35% over the long run as competition consolidates … (But) after a 100%-plus move off its 52-week low in 2023, we now believe valuation is stretched.”