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The London Stock Exchange is famous for its big banks like HSBC, Barclays and Lloyds. However, it’s also home to a handful of smaller fintech firms that are growing strongly.
Here are a pair that I reckon are well worth a closer look right now.
Money transfers
Wise (LSE:WISE) has shaken up the money transfer market by offering transparent pricing and faster cross-border payments. It now provides both personal and business accounts and is scaling nicely.
In FY24, Wise’s total cross-border volume increased 23% to £145.2bn. This generated underlying income of £1.36bn (up 18% in constant currency) and pre-tax profit of £282m (+19%).
Somewhat counter-intuitively, Wise keeps lowering its cross-border take rate. Last year, it reduced it by nine basis points to 0.58%. The firm thinks this will make it increasingly difficult for rivals to compete, leading to more customers and higher long-term growth.
Wise Platform — which was built for banks, financial institutions and global enterprises — now powers international payments for the likes of Morgan Stanley, Standard Chartered, and Brex. And it recently joined Google Wallet’s new remittance experience as one of the key providers.
We believe that our relentless focus on becoming ‘the’ network for the world’s money will enable us to move trillions around the world.
Wise co-founder and CEO Kristo Käärmann.
On valuation, the stock trades on a forward price-to-earnings (P/E) ratio of 29. That isn’t cheap, especially if growth falls short of market expectations (a key risk). But given the growing scale of Wise and massive long-term opportunity ahead, I feel it’s far from extortionate.
Cloud connectivity
Beeks Financial Cloud (LSE:BKS) provides low-latency cloud computing and connectivity services for trading and fintech clients. In other words, it acts as the hidden plumbing behind exchanges, brokers, and hedge funds.
Recent client wins include crypto exchange Kraken and the Mexican Stock Exchange. For the year ended 30 June, revenue is expected to have increased 25% to £35.5m, with underlying pre-tax profit growth of 41% (£5.5m). Earnings per share are expected to surge 126%.
Earlier this month, the company launched Market Edge Intelligence, the world’s first AI/machine learning solution for passive monitoring of capital markets data directly at the network edge. This shows the firm is focused on cutting-edge AI innovation.
The [Market Edge Intelligence] product has already received positive customer feedback and it is set to significantly expand Beeks’ addressable market, create upsell opportunities with existing customers and open a new recurring revenue stream, further adding to Beeks’ high proportion of contracted multi-year recurring revenue.
Beeks Financial Cloud.
Beeks has a small £139m market cap and trades on a forward P/E ratio of 23.5. Like Wise, growth will have to remain strong to justify the valuation. Its small size also adds risk, as a bad trading period could jeopardise profitability, especially while it’s still building out cloud infrastructure.
However, Beeks is starting to play an important niche role in financial markets, with notable blue-chip customers signing up. I’m very impressed with this small-cap fintech’s progress and reckon the stock has a lot of potential near 200p per share.
