3 Ways to Play the $300 Billion FinTech Boom
Once the finance insurgents, a fast-growing breed of upstarts who pose as alternatives to old-fashioned banks when moving money around the world are rapidly becoming mainstream. According to Lexologythe term “Fintech” generally describes technologies that strive to improve and automate the delivery and use of financial services to customers.
Aided by the emergence of cutting-edge technologies such as AI, cloud computing, big data, the Internet of Things (IoT) and machine learning, as well as an abundance of funding, the tech industry financials is growing like a weed – the world the industry should reach a valuation of $310 billion in 2022 growth at 25% CAGR.
Last year, one of the most anticipated U.S. fintech IPOs took place: a Brazilian startup Nu Holdings Ltd (NYSE:NU), billed as the world’s largest digital bank by number of member accounts, went public after its listing on the New York Stock Exchange.
NuBank is backed by several leading investors, including Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A), which invested $500 million in the company in June, and Tencent (OTCPK:TCEHY). NuBank also has pre-IPO backers such as Capital Sequoia and Global Tiger Managementas well as subsidiaries of Baillie Gifford, Morgan Stanley (NYSE: MS), and Soft Bank (OTCPK: SFTBY).
NU currently sports a market capitalization of $38.7 billion.
The ESG boom also helps.
A good example is Suctiona California-based online bank backed by Hollywood actor Leonardo DiCaprio of Titanic fame, which shaped itself as a Wells Fargo alternative, and whose proud mantra is “The clean rich are the filthy new rich.” Aspiration promises to take leftover currency from customer purchases and use it to plant millions of trees around the world.
forest of antsa mini tree planting program in the Alipay app which allows users to earn virtual points for making low-carbon lifestyle choices, announced that it has helped more than 600 million users plant more than 326 million trees since its launch in 2016 , contributing to reforestation efforts in some of the most arid regions of China.
Finovate lists 25 fintech companies which have turned green.
The vast majority of fintech companies are private, although others are likely to follow NuBank’s lead as the industry matures. Here we highlight some fintech ETFs that can take advantage of the growing fintech market.
#1. Global X FinTech ETF
AUM: $548.4 million
Expense ratio: 0.68%
Launched in 2016 and domiciled in the United States, Global X FinTech ETF (NASDAQ: FINX) is a traded index fund launched and managed by Global X Management Company LLC. The fund invests in equity markets in developed markets around the world.
FINX invests in shares of companies operating in financial technology products and services, including companies involved in mobile payments, peer-to-peer (“P2P”) and marketplace lending, financial analytics software and alternative currencies, collectively, fintech business sectors. It invests in growth and value stocks of companies with diversified market capitalization.
The top 5 FINX holdings are:
- Intuit inc. (NASDAQ: INTU)
- Block Inc. (NYSE:SQ)
- Adyen SA (OTCPK:ADYEY)
- Fiserv Inc. (NASDAQ:FISV)
- Bill.com (NYSE:BILL)
#2. ARK Fintech Innovation ETF
AUM: $1.6 billion
Expense ratio: 0.75%
ARK Fintech Innovation ETF (NYSEARCA: ARKF) is an exchange-traded fund launched and managed by ARK Investment Management LLC. It invests in shares of companies operating in the innovation sectors of financial technology (“Fintech”), in particular in companies considered to be socially responsible in their commercial relations and directly promoting environmental responsibility.
The fund seeks to benchmark the performance of its portfolio against the S&P 500 Index and the MSCI World Index. ARK ETF Trust – ARK Fintech Innovation ETF was established on February 4, 2019 and is domiciled in the United States.
The top 5 holdings are:
- Coinbase Global (NASDAQ:CURRENCY)
- Twillio Inc. (NYSE: TWLO)
- Shopify Inc. (NYSE: SHOP)
- Sea Ltd (NYSE: SE)
#3. ETFMG Prime Mobile Payments ETF
AUM: $899.4 million
Expense ratio: 0.75%
ETFMG Prime Mobile Payments ETF (NYSEARCA: IPAY) is an exchange-traded fund launched by ETF Series Solutions and managed by Exchange Traded Concepts, LLC. The fund invests in shares of companies operating in all sectors of the mobile payment business. These include companies that: (i) engage in the provision of payment processing services or applications, (ii) provide payment solutions, (iii) create or provide architecture, infrastructure or payment industry software or, (iv) provide services as a credit card network.
The fund invests in growth and value stocks of companies with a diversified market capitalization and seeks to track the performance of the ISE Mobile Payments Index, using a full replication technique. ETFMG Prime Mobile Payments ETF was established on July 15, 2015 and is domiciled in the United States.
The top 5 holdings are:
- American Express Co. (NYSE:AXP)
- Mastercard Inc. (NYSE: MA)
- visa inc. (NYSE:V)
- Block Inc.
- Fiserv Inc.
By Alex Kimani for Safehaven.com
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