Fintech giants Square and PayPal are taking Main Street by storm. More consumers, especially younger ones, are using services like Square’s Cash App and PayPal’s Venmo for mobile payments.
But banks and other traditional financial services firms are fighting back — and investors have taken notice. Goldman Sachs (GS) is the top performing stock in the Dow this year, surging 55%. American Express (AXP) isn’t far behind, up 45%. Both companies have begun to embrace digital banking as a way to attract newer customers. Goldman Sachs, for example, has moved beyond its roots as a powerhouse investment bank and wealth manager for the affluent, thanks to its Marcus online bank. The platform, which launched in 2016, has no branches and offers personal loans with no fees.
“There’s no question that activities that we’re involved in are digitizing quickly,” Goldman Sachs CEO David Solomon said on an earnings call with analysts earlier this month. “I think there’s a meaningful acceleration in the disruption that the digitalization of financial services is occurring.” American Express is sprucing up its somewhat stodgy image as well. The company announced new digital checking plans for small and mid-sized businesses Thursday. As part of the rollout, AmEx even launched its first ever debit card. “This is part of a multi-year strategy of going beyond the credit card. This is the latest manifestation of that,” Dean Henry, AmEx’s executive vice president of global business financing, payments and digital experiences, said in an interview with CNN Business.
“We have an obligation to go where clients are transacting,” he added. “A debit card is new for AmEx. We are modernizing the network and keeping pace with payment types that are popular.” Large financial firms also recognize that partnering with fintechs can be extremely lucratve. “Fintechs have also fueled our growth,” Visa (V) CEO Al Kelly said on an earnings conference call Tuesday. “In the last year, nearly 30% more fintechs issued Visa credentials, and they have more than doubled their payments volume.”