The market cap for mobile payment company Square (NYSE: SQ) reached $70.7 billion this week, surpassing the $70.5 billion market cap for investment bank Goldman Sachs (NYSE: GS).
This milestone serves as another example of younger fintech companies eclipsing the legacy players in financial services.
In July, PayPal (Nasdaq: PYPL) exceeded Bank of America (NYSE: ABC) in market cap. As of this week, PayPal still has a market cap that is more than $22 billion higher than Bank of America.
JPMorgan Chase (NYSE: JPM) is the only bank to be worth more than PayPal, says CNBC.
Shares of Square are up 144% year-to-date, including a 13% increase in the last month. PayPal stock is up 89% this year.
The big banks have struggled in 2020. Shares of Goldman Sachs are down 9% year-to-date and Bank of American has fallen 27%.
It's been an incredible few years for fintech companies as adoption rates of financial technologies skyrocketed. The mobile payment market has more than doubled from $459 billion in 2015 to $1 trillion in 2019.
This growth is only the beginning for fintech companies. A report from ResarchandMarkets predicts that the fintech sector will increase at a compounded annual rate of $20% to a total value of $305 billion by 2025.
Fintech startups have spent the past few years catching up to legacy financial institutions, but it was the pandemic that accelerated the change and closed the gap. An increase in e-commerce and digital payments during the pandemic, coupled with an injection of government stimulus to consumers, fueled revenue growth at Square and its fintech companions.
Meanwhile, the big banks have been challenged this year by the possibility of consumer defaults on credit cards and mortgages. The Fed's decision to keep interest rates near zero has also limited what the banks can do.