The FinTech industry has been disrupting the longstanding global payments and processing space for the last few years. The onset of the COVID-19 pandemic accelerated the adoption of this new space, as businesses continue to leverage technology to stay relevant amid the changing landscape.
In a surprising move, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) made a US$500 million investment in the industry. Buffett-led Berkshire invested in the parent company of Nubank, a privately held digital bank based in Brazil. This recent development shows the spark of new interest from Buffett in the FinTech space.
I will discuss Berkshire’s recent move and an attractive bet for you to consider in the Canadian FinTech space.
Massive investment in the FinTech space
Nubank is best known as a credit card issuer that has been a fast-growing entity in the FinTech space. The company recently began a campaign to raise funds, and the move has been successful. Between the US$500 million from Buffett’s Berkshire Hathaway and US$250 million from other investors, the company has raised an astounding US$750 million in capital.
The new investments have given the company a US$30 billion valuation, up from US$25 billion during its previous fundraising round. The recent moves have taken Nubank into the upper echelons of FinTech companies worldwide. There are even reports of Nubank initiating preparations for a U.S. stock market listing as early as this year, spelling great news for the company and the broader FinTech space.
A Canadian FinTech stock to consider
Considering the substantial growth in this sector during recent years, it would make sense to seek assets operating in a similar space in Canada. Lightspeed POS (TSX:LSPD)(NYSE:LSPD) is not a stock that typically comes to mind when you think about the FinTech sector. However, the high-growth tech stock has become far more than an omnichannel sales platform provider.
The company has adopted a fully integrated approach to provide commerce on all channels, online and offline. Lightspeed focused on in-store transactions before the pandemic, but it has since enhanced its online e-commerce solution, as over 80% of traffic moved online during the pandemic.
The company’s recent acquisitions in the tech space have allowed it to expand its customer base and allowed its merchants to reach more consumers. These acquisition deals will help the company reduce its cost of acquiring new merchants and help it offer Lightspeed Payments and Lightspeed Capital for supplier-merchant transactions.
The FinTech industry is growing and evolving at a rapid pace. Warren Buffett’s massive move in the sector is a strong indicator that he is bullish about FinTech companies. With the industry growing rapidly and card payments forecasted to touch US$45 trillion in the next four years, Lightspeed POS could make an attractive Canadian bet to consider if you want to capitalize on this space.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Lightspeed POS Inc. The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares).