Published on June 29, 2018

The fintech revolution is having a major impact on the financial services industry. In this piece Jim Callinan discusses two firms leveraging financial technology that he feels are well-positioned to deliver compelling growth.

Nearly the entire financial services landscape is undergoing a transformation. Established companies are aggressively deploying new technology to stay on top, while challenger firms are working hard to take market share from industry leaders in most every vertical. 

The fintech revolution has brought us attractive investment opportunities and we believe it will continue to in the future. Below are two firms leveraging fintech that we feel are well-positioned to deliver compelling growth. Each company has built its business by exploiting a different dimension of the technology revolution.


One of the early disruptors in financial services was LendingTree (TREE). In the late 1990s its founder, Doug Lebda, created a company designed to simplify the arcane process of getting a mortgage. Using his own frustrations as motivation, he set out to streamline a system that was highly fragmented and dominated by the major banks.
LendingTree began with a simple idea – a website that offered consumers a convenient way to comparison shop for mortgages. Users could enter their information once, and it would be routed to all the lenders on the platform. At the same time, they enabled mortgage providers, including nontraditional players such as QuickenLoans and Loan Depot, to attract new borrowers and compete with large banks at a reasonable cost. 
Since its founding LendingTree has continuously expanded its business, utilizing its flexible technology platform to add home equity loans, small business loans, student loans and, most recently, credit cards. Their tech savvy team of Silicon Valley marketers relies on highly targeted, digital advertising channels to drive borrowers to their site. 
LendingTree views itself as the Travelocity of financial services – breaking up the lending vertical while simultaneously improving the customer experience. The company expects to reach $3 billion in sales in 5 years as the firm grows from 6% to a projected 20% of the $15 billion spent by financial institutions for online marketing.
BOFI Holdings (BOFI) is an internet-based bank that has leveraged technology to successfully challenge the traditional assumption that financial institutions need to operate branches in their local markets. Its robust technology infrastructure has allowed BOFI to build a business with higher operating margins than most comparably sized financial firms, as BOFI does not maintain the costly overhead of a branch network. 
Their return on equity is one of the highest in their peer group1, coming in at the 93rd percentile. Additionally, their efficiency ratio, which measures their expenses divided by their revenue, is an impressive 32% compared to 63% for their peer group.
BOFI’s lean, technology-centered approach has not impeded the firm’s growth. Over the past 5 years, their loan origination business has delivered a 32% compound annual growth rate while their core deposits have also grown 34% on a compound annual basis over the past 5 years.
Since its founding as a consumer online bank, BOFI has evolved to provide a wide range of banking services to both consumers and businesses. The company utilizes a combination of digital marketing, data-driven direct marketing and distribution partnerships to expand its customer base.
As BOFI continues execute its strategy we expect the company will continue to deliver impressive growth with operating income increasing from $300 million to $450 million over the next three years.


LendingTree and BOFI Holdings are good examples of companies that are disrupting the financial services industry and thereby creating exciting growth opportunities for investors. We think the financial services sector will continue to see disruptive change, and we will be carefully monitoring these up-and-coming companies.

James L. Callinan

Vice President & Chief Investment Officer – Emerging Growth

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1Peer group is all savings banks with assets greater than $1 billion for quarter ended 9/30/17.

Opinions expressed are those of the author, are subject to change at any time, are not guaranteed and should not be considered investment advice.

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