Steve McDonald: Hi, everybody. I’m Steve McDonald. This is your Market Wake-Up Call. The focus this week is on online money activity and transactions. It’s called fintech. And this story starts way back before ATMs when banks closed at 2 p.m., and if you didn’t have any cash by 2 p.m. on Friday, you were out of luck. Where I grew up, there were a couple little stores and pubs that would cash a check for $10 or $20, but other than that, you were out of luck for three days. Now, back then, trips to the bank were a daily part of life. There were no alternatives. You had to go in to deposit a check or cash a check. Anything having to do with money, you had to go through a bank, and that meant driving, parking, going inside and standing in line. Remember the lines? There always seemed to be one. The ladies who worked there were so nice that you didn’t mind. So few people use bank branches now – they’re closing everywhere. Online money transactions have become so prevalent, there just isn’t any reason to go to a bank. It’s gotten so pervasive that you can do almost all the paperwork for a mortgage online. And it’s fintech that makes it possible to do everything with money online.

I remember the first time I used an ATM. It was in Newport, Rhode Island, in the summer of 1980, and the machine ate my card. Remember that kind of thing? The systems now, of course, are light-years ahead of that and have become so essential. I wonder if most of us could survive without ATMs, online banking, online retail, you name it. It makes shopping, traveling and investing a whole lot easier. I remember when it took seven days to clear a stock trade. But all this convenience has come with a cost. Credit and debit card theft and fraud, bank fraud, online money scams, and identity theft… the losses from these things have been huge. In just one year, the banking industry lost $2.2 billion to online bank fraud, and that was a 16% increase in just two years. Debit card fraud for the same period was $1.3 billion. Just attempted online fraud against banks was $19.1 billion in 2016, up from $12.9 billion in 2014 – a 45% increase in two years. Online fraud is so prevalent that it’s been described as water trying to find a crack in the system. If you’ve ever tried to stop a leak somewhere, you know what I’m talking about.

That’s how big the problem of online bank and credit card fraud is, but here’s a feel for how much money can be made fixing that. How does $30,000 a minute sound? That’s how much the company our guest is here to talk about today is making while correcting the problems I just described. Our guest, Chief Income Strategist Marc Lichtenfeld and Editor of the Stock Sequence Trader, is here to talk about how one company in the world is tackling the problems associated with online transactions. Welcome, Marc.

Marc Lichtenfeld: Hi, Steve.

Steve McDonald: The convenience of this whole thing… is it being outweighed by these issues? How big is this problem?

Marc Lichtenfeld: Well, as you mentioned, the problem of online fraud and financial transaction fraud is big. It’s well into the billions and will likely only get bigger. What’s that expression about why you rob banks? Because that’s where the money is. But on the other hand, so much of the financial world is moving online and moving to apps. And yes, there are problems and there is fraud, but it is also so convenient. I can’t remember the last time I went into a bank to get cash. I barely go to the ATM anymore. I mean, if I go to the ATM a handful of times in a year, that’s a lot because I almost never need to use cash. I have my credit cards, I can deposit checks on my phone and I pay everything online.

Steve McDonald: What do you do with the paper check once you scan it and deposit it?

Marc Lichtenfeld: I rip it up and put it in the garbage.

Steve McDonald: Really?

Marc Lichtenfeld: I mean, I shred it.

Steve McDonald: I’ve never done that.

Marc Lichtenfeld: I’ll make sure it’s shredded fairly well.

Steve McDonald: You’re going to laugh. I still write checks for most of my bills.

Marc Lichtenfeld: I still do when I have to.

Steve McDonald: You don’t have to be nice to the old guy.

Marc Lichtenfeld: I write a few checks here and there, but most of my bills are paid online now.

Steve McDonald: I had so many problems – and this is going back 20 or 25 years – where you would set up an automatic payment and suddenly they’d take out 10 times what you owed them. And then it would take you six months to get the money back. Is there a fix for this?

Marc Lichtenfeld: Things have come a long way since then. Actually, the one problem I’ve had in recent years is the opposite, where the automatic payment was sent by my bank on time, but there was a problem on the vendor’s end and it didn’t go through. But is there a fix? Yes, the technology’s becoming so sophisticated and so convenient that this industry is just absolutely booming. Right now, there’s about $14 trillion that goes through the financial system every day in the United States, and fintech is taking a bigger and bigger chunk of that literally every day. There are new applications and new technology. It is such a big market that’s only getting bigger. It’s a space where all the smart money in Silicon Valley is putting their efforts into right now.

Steve McDonald: I read part of your fintech report. You quoted a number in there that I thought was a little outrageous until I started to think about it. There’s a company that’s making $30,000 a minute in the fintech area. That works out to $43 million a day. Is the market that big? That’s one company. That’s the one company you’re looking at in this report.

Marc Lichtenfeld: Yes, and it has only about a 1% to 2% market share. And this pie is getting even larger.

Steve McDonald: That’s $2.2 trillion.

Marc Lichtenfeld: The CEO of this company believes it’s going to be a $100 trillion market sometime in the next several years. So that’s why I’m so excited. If this company with 1% to 2% market share picks up even just another 1% market share, the revenues, the earnings and the cash flow will just be through the roof. So that’s how big this market is, and some of the leading names – I don’t want to say mature because everybody’s kind of growing in this sector – have been around a while. It’s not a startup, and it’s not a unicorn hoping to raise some more money. This is a business that is making a ton of money already: profits. Not just revenue, but actual profits. And so if it can just grab a little bit more market share in this swelling pie, it’s going to be huge.

Steve McDonald: Can one company do this? I mean, how much can it capture if it has 1% to 2% now?

Marc Lichtenfeld: That’s a great question. I’m not banking on it dominating the market because it’s such a big market that I don’t think anybody is going to capture more than 40%. Right now, it has about 2% market share. So if it grows its market share by 50% and gets 3% market share… right now, it’s more than $1 billion.

Steve McDonald: That’s $1.2 billion a day.

Marc Lichtenfeld: Right. So if it can just capture that – if it can get 3% of the market share of something that right now is more than $2 trillion and someday could be more, and even if the CEO’s $100 trillion is way off the mark and it’s only a $20 trillion to $30 trillion market – it would be absolutely tremendous. So that’s why I’m very excited about this company. And just for the record, this company is not like a fraud protector. It’s not like a competitor of LifeLock. It has all kinds of things built into its systems to try to prevent fraud, but it is in a different line of work, and one that I believe is more lucrative because it’s something more people use every day.

Steve McDonald: Fintech, folks. This is something you’ve definitely got to take a look at. There’s a link down below. And that’s about it. Thank you so much for being with us.

Marc Lichtenfeld: Sure. Thanks for having me.

Steve McDonald: This is amazing stuff. Every time you come in, it’s either pharma magic or now fintech magic. And I want to thank you folks so much for being a part of this, and I’ll see you next week. Take a look at this one.

[End of Audio]