Alex Kutsishin is one of the reasons why I’m so excited about the rapidly emerging field of finance technology.
Called fintech for short, this is an area that will touch virtually every aspect of the $70 trillion global economy over the next several years.
Here’s what I mean…
By definition, every single transaction involves some sort of payment. Increasingly, those payments are moving to digital systems – and eventually virtually all of them will get there.
And that means every aspect of finance today – from hedge funds to bond management to buying a pack of gum at your corner market – is ripe for tech disruption.
That innovation is coming from savvy entrepreneurs like Alex Kutsishin, the CEO and founder of fintech startup Sales Boomerang, which focuses on helping banks plug billions in home-loan leaks.
I recently spent a couple hours talking with Kutsishin on a flight home from Money Map Press headquarters in Baltimore to Silicon Valley.
I had intended to tune out my fellow passengers and listen to some music while catching up on work. But after introducing ourselves, Kutsishin couldn’t help but explain further exactly what he did.
I found his spiel so fascinating – and potentially lucrative – that I put my headphones down… leaned in… and listened.
Today I’ll introduce Kutsishin and Sales Boomerang to you folks.
Unfortunately, his company is privately held and you can’t invest in it… yet.
But I have found a great way you can play the red-hot fintech trend
Tackling the Credit Score Disconnect
As my longtime readers can attest, my interest in fintech goes back 30 years. In the late 1980s, I worked as the San Francisco bureau chief for American Banker, a trade journal known as the “bible of the industry.”
And I was there just as bankers began adopting more sophisticated computer technology. Of course, by today’s standards those tech platforms would seem like tools from the Stone Age.
But here’s the thing – I saw firsthand what can happen when fintech is done poorly. I broke a series of stories about a mismanaged computer network changeover at Bank of America, uncovering a $60 million mistake.
Those stories led to the dismissal of two executive vice presidents.
In other words, I know just how important good fintech is to the financial services industry – and why a great tech platform can be worth its weight in gold.
That’s where Kutsishin and Sales Boomerang come in.
Turns out, he’s targeting a big financial drain among lenders.
See, every lender in the nation uses credit scores to determine if a customer qualifies for a loan. Not surprisingly, many customers have credit blemishes that could be cleaned up in a year or less. The problem is figuring out when those customers cross that threshold – when they become credit-worthy.
The disconnect, and Kutsishin’s hook in the home-loan market, is that most banks today have no way of tracking those clients even if they’re using customer relationship management (CRM) software.
It’s sort of like having bank managers walk down the street and leaving $100 bills on the sidewalk.
Putting Profits “on Steroids”
Enter Sales Boomerang and its sophisticated, cloud-based tracking system that alerts creditors the moment someone the startup is tracking qualifies for a loan.
During our flight, Kutsishin ran some numbers to show me how powerful Sales Boomerang’s platform can be.
If a lender receives just 1,000 requests a month for an average mortgage of $250,000, Sales Boomerang could deliver $90 billion in extra loan volume per year. And that’s assuming a mere 5% conversion rate – and at just one lender.
“This is taking the lender’s return on investment and putting it on steroids,” Kutsishin told me. “When we show this to potential clients, they’re just blown away.”
No wonder lenders like AmCap Mortgage, Centennial Lending Group, and USA Mortgage have signed on as Sales Boomerang clients.
But there’s more going on in fintech than just Kutsishin’s success.
A lot more.
In fact, the whole sector is really heating up.
According to data from the venture-capital trackers at Crunchbase, since 2016, fintech startups have raised more than $15.6 billion. And the money is coming in quick. Crunchbase says the sector saw 136 VC deals in the first quarter alone.
We’re also seeing established firms grabbing startups and folding them into their operations. In roughly the last six months, there were at least 30 fintech mergers, according to online tracker Index by TNW.
That’s why I think savvy tech investors ought to take a run at this stock…
A Fintech Shopping Spree
In May, PayPal Inc. (Nasdaq: PYPL) said it would pay roughly $2.2 billion to buy iZettle, a Sweden-based payments startup.
With iZettle, PayPal bought what amounts to a one-stop shop for cutting-edge commerce tools, offering clients a range of tech solutions that once were reserved for big players. I’m talking about lightning-fast mobile card readers, intuitive point-of-sale systems, invoicing software, business funding, and smart analytics.
On June 19, PayPal bulked up even more when it agreed to pay $400 million for Hyperwallet, a privately held firm that helps individuals and small firms receive payments for goods and services they sell online. Hyperwallet can disburse payments in more than 200 countries through a variety of forms, including debit cards and transfers into bank or PayPal accounts.
Two days later, PayPal paid $120 million for Simility, a leading fraud-prevention and risk-management tech platform. It should give PayPal users even better protection against financial crimes.
These are no isolated mergers for PayPal. The company has said it will spend up to $3 billion per year on acquisitions.
And it’s got a history of solid buys. For example, PayPal scored a big victory when it bought mobile payment firm Venmo back in 2014. Today, Venmo is a big star in PayPal’s portfolio, giving it access to clients who could sign on for decades.
That’s because Venmo is wildly popular with mobile-centric millennials. Both my daughters, ages 19 and 22, use it all the time, and my wife uses it to send them money.
They all rave about the quality of the platform – and these are some picky consumers.
A Very Lucrative Spinoff – and Triple-Digit Profits on the Way
Fact is, PayPal is building a great track record of making acquisitions that add new sales and profits and add to its deep bench of expertise.
It’s an ironic turn of events for the storied Silicon Valley firm. PayPal was so successful at helping eBay Inc. (Nasdaq: EBAY) merchants settle payments that the online auction house bought it in October 2002, just months after PayPal rocked the market with a successful IPO.
But in 2015, under pressure from activist investor Carl Icahn, eBay spun off PayPal. The move put PayPal on a very fast track.
Over the past three years, it has grown per-share earnings by roughly 21%. Even better, earnings are rising more than 16% faster than sales, a sign of improving cash flow – the firm now has more than $9 billion cash on hand.
The stock closed yesterday at $83.89, giving it a market cap of $99.61 billion. Over the past two years, it has gained roughly 125%.
But if you’re thinking the good times are gone for this story, don’t worry. I still see plenty of upside ahead.
At its current growth rate, PayPal should double earnings in less than 3.5 years. Stocks trade at a multiple of earnings, so the stock will likely double over that period as well.
An investment in PayPal puts you at the forefront of the fintech revolution. And it offers solid, stable gains that you can count on to double your money.
Now that I’ve told you about all the technology upending the financial services industry, you’ll also want to check out my latest investor briefing about a company that’s upending the way we get our electricity.
This firm’s tech could spell the end for the way we power our TVs, lamps, smartphones, and even autos.
Cheers and good investing.
I’ll see you back here soon.