Big Banks Are Buying into Fintech — Consider this Top Play Instead

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  • One of the biggest trends in the past few years has been in the payment space. A number of companies are offering alternative ways to clear payments that bypass the existing credit card system or the banking system as well.

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  • Naturally, big banks have noticed, and are starting to get into the trend themselves. JPMorgan Chase (JPM), for example, just launched QuickAccept. The new service offers a mobile app and contactless card reader.

    The move is a shot across the bow of fintech companies like PayPal (PYPL) and Square (SQ). The key competitive feature? Waived fees for those who do daily volume of at least $2,000. That may benefit larger retailers, who are still paying fees on most existing fintech programs.

    Action to take: While the move is a welcome one, big banks are still a better fit for investment banking and other traditional programs. The value in fintech is still with those specific firms.

    Traders should look at buying the March 2021 $200 calls on Square (SQ). The payments company had a rare down day after the news from JPMorgan, creating a buying opportunity. The company’s recent decision to park some of its assets in Bitcoin also gives it a potential explosive value given the gradual rally in that cryptocurrency.

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  • The option has a bid/ask spread in the low $18 range, and should offer traders a mid-to-high double-digit return on a move higher in shares.