Paya, Digital Banks Help FinTech IPOs Notch Gains

A gain. A small one, but a gain despite.

The FinTech IPO Tracker got a bit of a breather this week, clawing out a 73-basis-point rise, and for now, investors may take their relief where it can be found.

And yet June is still on track for a loss, hovering at more than 6% to date as we head into the final week of trading. The year-to-date performance is anything but cheery, standing at a loss of more than 41% thus far in a 2022 that most people would rather leave behind.

However, digital banks and payment platforms helped lead the charge through the past week, as several names surged by more than 10% through the past five trading days.

Paya Leads the Pack

Paya Holdings led the group this time around, soaring by nearly 20% on the week. Its year-to-date return, at a bit above 6% losses for 2022 thus far, remains among the best performers in our tracker.

The payments tech company is mulling putting itself up for sale, and would-be suitors have expressed interest. Any possible deal would come on the heels of the tie-up earlier this year when Paya merged with a special purpose acquisition company (SPAC) backed by serial dealmaker Betsy Cohen.

Read more: Payments Tech Firm Paya Courts Takeover Offers

Separately, Paya said this week that it has been selected by Promise, a Software-as-a-Service (SaaS) government payments company, as an integrated payments partner. Under the agreement, Promise will work with utilities and government agencies across the United States, enabling agencies to provide payment flexibility in underserved areas and for citizens who are in debt or unable to pay their bills in full.

Platform, Banking Performers

Payments platforms in general were among the top “segment” of outperformers, although company-specific news may not have been in the offing. Flywire was up around 16% through the week, followed by Alkami, which trailed only slightly at about 15.4% gains over the same period.

The digital banks — those upstarts challenging the financial services incumbents, also gave tailwind to overall performance.

Nubank was up 14.9%, driven higher by the news that the company is on the lookout for “FinTech bargains in Latin America” — in part by taking advantage of the fact that funding is drying from venture firms and other sources of startup funding.

Nubank CEO David Vélez said this week it will make sense for some players in the crowded FinTech market in Latin America to merge or sell.

See more: Nubank Hunts M&A LatAm FinTech Bargains

“This will enable the survival of the fittest,” he said, estimating that there are probably 40 digital banks in Brazil — and people want three or four payment apps on their smartphones, not 20.

These gains were tempered a bit by the fact that there were some stocks that slid to the downside. Opportun was off roughly 12%, followed by Robinhood, also off double digits at nearly 11%. The latter firm’s cash position has been declining, and analysts have been slashing ratings and price targets due in part to the continued exposure to the vagaries of crypto trading.

Read more: Robinhood’s Cash Pile Eroding as Shares Slide to New Lows

Leave a Comment