The rise of financial technology has been a positive trend of late. Here are five fintech ETFs to profit from it.
America, China and dozens of countries around the world are scrambling to capture the growth of what I refer to as a “power sector” that will spawn many 10X stocks. This sector that sits at the nexus between finance and technology is usually referred to as “fintech.”
Thanks to the ubiquity of smartphones, the internet, digital payments and financial technology, consumers have a sweeping new set of options for how to manage their finances, purchase things and even grow their portfolios. Emerging financial technology is driving the evolution of payments and financial services as companies and countries attempt to adapt to evolving consumer expectations regarding choice, costs, convenience and security.
Here are five fintech ETFs (exchange-traded funds) that you can tuck in your portfolio to capture this disruptive growth.
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Fintech ETF #1: Global X FinTech ETF (FINX)
This Global X FinTech ETF is the oldest and most established on the list. With nearly five years of track record on public markets, FINX is a legitimate ETF with clear interest behind it. The tactics of this fund involve putting money behind companies “helping to transform established industries like insurance, investing, fundraising, and third-party lending,” according to Global X. That means a mix of names you may have heard of like mobile payments giant PayPal Holdings (PYPL) and others you may not have, like mortgage lending analytics firm Black Knight (BKI).
Fintech ETF #2: ARK Fintech Innovation ETF (ARKF)
The ARK family of ETFs may not be as well known as some of the others in the market, but these unique offerings are focused on disruptive areas of technology and growth, from biotech stocks to self-driving vehicles. ARKF is the fintech ETF, launched in early 2019 and offering exposure to firms in mobile payments as well as digital wallets and blockchain technology. Its leading position right now is payments fintech Square (SQ) as well as a smattering of digital retail plays, including South American e-commerce giant MercadoLibre (MELI).
Fintech ETF #3: ETFMG Prime Mobile Payments (IPAY)
Mobile payments are a big part of the potential many see in fintech. Just as a digital age has allowed us to easily access information on the go, smartphones also allow us to transact anywhere on the planet – without cash, and often with greater security than with a physical credit card.
The ETFMG Prime Mobile Payments ETF is a pure play on this corner of fintech, featuring PayPal and Square along with blue chips like Visa (V) and smaller players like PaySign (PAYS) that are seeking a piece of the mobile payments pie. The fund isn’t as broad as others on the list, but with $1.2 billion in assets represents one of the larger dedicated fintech funds.
Fintech ETF #4: Tortoise Digital Payments Infrastructure Fund (TPAY)
A smaller and more recent entrant, TPAY is also a twist on digital payments – but one that focuses on the infrastructure required for 21st century transactions rather than trying to pick stocks that process the most volume. One leading holding is Fiserv (FISV), which offers risk management and compliance services as well as technology services to banks. DocuSign (DOCU) is another holding that provides security and verification services. Rather than build up an installed user base with a payment app or demand billions in linked accounts, these companies count the banks themselves as clients – not consumers – and add an interesting twist to the digital payments trend.
Fintech ETF #5: Capital Link NextGen Protocol ETF (KOIN)
If the name of this fund has you wondering what it has to do with fintech, the ticker offers a clue. This fund focuses on blockchain technology that powers cryptocurrencies including bitcoin, ether and others. Blockchain is a way to track and digitize assets of any form in a secure and decentralized way.
The largest of KOIN’s holdings are tangential plays like chipmaker Nvidia (NVDA), which is well known for creating the hardware used by cryptocurrency miners. KOIN is in position to give investors an easy way to play the growth in cryptocurrencies – without the volatility of owning actual bitcoin.
For specific stock picks in the fintech, crypto, cybersecurity and the mobile payments space, consider trying my Cabot Explorer advisory today.
*This post has been updated from an original version, published in 2020.