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3 Ways To Play The $300 Billion Fintech Boom

  • Fintech is a fast-growing alternative to old-fashioned banking.
  • The global fintech industry is projected to reach a valuation of $310 billion this year. 
  • While many of the biggest fintech firms are still private, there are some ETFs that will help investors gain exposure to this burgeoning industry.

Once the insurgents of finance, a fast-growing breed of upstarts that bill themselves as alternatives to old-fashioned banks when moving money around the world are rapidly going mainstream. According to Lexology, the term 'Fintech' generally describes technologies that strive to improve and automate the delivery and use of financial services to clients. 

Aided by the emergence of cutting-edge technologies like AI, cloud computing, big data, the Internet of Things (IoT), and machine learning, as well as an abundance of funding, the fintech industry is growing like a weed--the global industry is projected to reach a valuation of $310 billion in 2022 growing at 25% CAGR.

Last year, one of the most anticipated U.S.-listed initial public offerings from a fintech company took place: Brazilian startup Nu Holdings Ltd (NYSE:NU), heralded as the largest digital bank in the world by number of member accounts, went public after listing on the New York Stock Exchange.

NuBank is backed by several high-profile investors, including Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A), which invested $500M in the company in June, and Tencent (OTCPK:TCEHY). NuBank also boasts pre-IPO backers such as Sequoia Capital and Tiger Global Management, along with affiliates of Baillie Gifford, Morgan Stanley (NYSE:MS), and SoftBank (OTCPK:SFTBY).

NU currently sports a market cap of $38.7B.

The ESG boom is helping, too.

A good case in point is Aspiration, a California-based online bank backed by Hollywood actor Leonardo DiCaprio of the Titanic fame, that has fashioned itself as a Wells Fargo alternative, and whose proud mantra is "Clean rich is the new filthy rich." Aspiration promises to take the leftover change from customers' purchases and use it to plant millions of trees around the world.

 Ant Forest, a tree-planting mini program in the Alipay app that enables users to earn virtual points for making low-carbon lifestyle choices, announced that it has helped over 600 million users plant more than 326 million trees since it launched in 2016, contributing to reforestation efforts in some of China's most arid regions.

Finovate lists 25 fintech companies that have gone green.

The vast majority of fintech firms are privately owned, though more are likely to follow NuBank's lead as the industry matures. Here we highlight some fintech ETFs that can gain from the growing financial technology market.

#1. Global X FinTech ETF

       AUM: $548.4M

       Expense Ratio: 0.68%

Launched in 2016 and domiciled in the United States, Global X FinTech ETF (NASDAQ:FINX) is an exchange traded fund launched and managed by Global X Management Company LLC. The fund invests in the public equity markets of global developed markets. 

FINX invests in stocks of companies operating across 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 companies sectors. It invests in growth and value stocks of companies across diversified market capitalization. 

FINX's Top 5 holdings are:

  • Intuit Inc. (NASDAQ:INTU)
  • Block Inc. (NYSE:SQ)
  • Adyen NV (OTCPK:ADYEY)
  • Fiserv Inc. (NASDAQ:FISV)
  • Bill.com (NYSE:BILL)

#2. ARK Fintech Innovation ETF

      AUM: $1.6B

      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 stocks of companies operating across financial technology ("Fintech") innovation sectors—specifically in companies that are deemed socially conscious in their business dealings and directly promote 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 formed on February 4, 2019 and is domiciled in the United States.

Top 5 holdings are:

 

  • Block Inc.

 

  • Coinbase Global (NASDAQ:COIN)

 

 

  • Twilio Inc. (NYSE:TWLO)
  • Shopify Inc. (NYSE:SHOP)
  • Sea Ltd (NYSE:SE)

#3.  ETFMG Prime Mobile Payments ETF

       AUM: $899.4M

       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 stocks of companies operating across mobile payments companies sectors. These include companies that: (i) engage in providing payment processing services or applications,(ii) provide payment solutions, (iii) build or provide payment industry architecture, infrastructure or software or, (iv) provide services as a credit card network.

The fund invests in growth and value stocks of companies across diversified market capitalization and seeks to track the performance of the ISE Mobile Payments Index, by using full replication technique. ETFMG Prime Mobile Payments ETF was formed on July 15, 2015 and is domiciled in the United States.

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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