The fintech (financial technology) industry is transforming the US financial sector as we are witnessing a digital payment revolution. It’s not surprising that fintech stocks have been among the biggest outperformers of the year. The e-commerce boom and digitization of major service industries have triggered rapid adoption of remote financial transactions.
The move to contactless payments is not going to abate when the virus is defeated. A study by Ark Investment Management shows that fintech adoption could increase exponentially. The firm estimates digital wallet users in the United States to reach 227 million, at a 27% CAGR, by 2024. However, betting on individual fintech stocks could be risky at this moment. ETFs could help you mitigate this risk as they hold a broad and diversified exposure at minimal operating costs.
The ARK Fintech Innovation ETF (ARKF), ETFMG Prime Mobile Payments ETF (IPAY), Tortoise Digital Payments Infrastructure Fund (TPAY), and Global X FinTech ETF (FINX) are currently the best ETFs to invest in the fintech space.
ARK Fintech Innovation ETF (ARKF)
ARKF is an actively-managed ETF that follows thematic multi-cap exposure to fintech innovations including mobile payments, digital wallets, peer-to-peer lending, blockchain technology, and risk transformation. The ETF defines “fintech innovation” as the introduction of a technologically enabled new product or service that potentially changes the way the financial sector works. ARKF is a relatively new fund that commenced its operations in February 2019. Although the fund does have international exposure, 67% of its holdings are in the United States. It has $1.06 billion in AUM, with an expense ratio of 0.75%. The ETF has an MSCI ESG Fund Rating of BBB based on a score of 5.57 out of 10.
The fund currently holds 47 companies, with the Software & Information Technology sector naturally leading the way, with a 50.1% weighting. The ETF also has exposure to the Communication Services sector (14.4%) and the Financials sector (11.2%), respectively. The top 3 holdings of the fund are Square, Inc. (SQ), Pinterest, Inc. (PINS), and MercadoLibre, Inc. (MELI), with weights of 10.2%, 4.5%, and 4.3%, respectively.
ARKF closed yesterday’s trading session at $41.88, gaining more than 74.6% year-to-date. The fund has witnessed net inflows of $507 million over the past three months, and has recently reached an all-time high of $45.77.
How does ARKF stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating.
It is ranked #4 out of 95 ETFs in the Technology Equities ETFs group.
ETFMG Prime Mobile Payments ETF (IPAY)
IPAY capitalizes on the shift from credit card and cash transactions to digital and electronic systems. It aims for pure play exposure to one niche and is the only ETF that targets the mobile payments industry. The fund is benefiting from the increasing use of smartphones, e-commerce, and the need for hassle-free transacting. The investment seeks to provide investment results that correspond to the Prime Mobile Payments Index, a modiﬁed linear-based capitalization-weighted index.
IPAY has $829.24 million in AUM and an expense ratio of 0.75%. Although the fund does have international exposure, 76% of its assets are in the United States. The ETF has an MSCI ESG Fund Rating of A based on a score of 5.31 out of 10.
The fund currently holds 41 companies with weights of 82.5% to the Data Processing & Outsourced Services sub-industry, followed by 10.1% and 2.4% allocations to the Consumer Finance and Electronic Equipment & Instruments industries, respectively. The top 3 holdings of the fund are SQ, American Express Co. (AXP) and Fiserv, Inc. (FISV), with the weights of 6.3%, 6.1%, and 5.9%, respectively.
IPAY has gained 17.4% so far this year to close yesterday’s trading session at $58.20. The ETF witnessed a net inflow of $92.4 million in the past six months and is up nearly 34% in the same period. Moreover, the fund has recently hit its 52-week high of $60.25.
IPAY’s POWR Ratings reflect a promising outlook. It has an overall rating of “Buy” with an “A” for Peer Grade, and a “B” for Trade Grade and Buy & Hold Grade. Among 38 ETFs in the Financial Equities ETFs group, it’s ranked #3.
Tortoise Digital Payments Infrastructure Fund (TPAY)
TPAY invests in companies that have the potential to benefit as the world continues to evolve from traditional cash payments to the speed, accuracy, and efficiency of digital payments. It provides access to all companies in the fee-based credit card value chain, including merchant acquirers, processors, networks and issuers. The fund seeks to track the Ecofin Global Digital Payments Infrastructure Index using a passive management approach.
Tortoise launched TPAY in February 2019, so the ETF is relatively a new fund. TPAY has $7.62 million in AUM and an expense ratio of 0.40%. The fund pays an annual dividend of $0.56, yielding 1.42%. TPAY has an MSCI ESG Fund Rating of BBB based on a score of 5.00 out of 10.
The fund allocation comprises a 53% weighting, by revenue, to Electronic transaction processing, followed by allocations of 18% and 13% to Credit card networks and Merchant payment products/services, respectively. The ETF excludes stocks listed in emerging markets. The top 3 holdings of the fund are Worldline SA (WLN FP), Discover Financial Services (DFS) and SQ with weights of 3.9%, 3.8%, and 3.7%, respectively.
TPAY has gained 24% so far this year to close yesterday’s trading session at $39.40. The ETF witnessed a net inflow of $23.5K in the past six months and is up nearly 36.2% in the same period. Moreover, the fund recently hit its 52-week high of $40.97.
TPAY is rated a “Buy” in our POWR Ratings system. It holds a “B” in Trade Grade, Buy & Hold Grade, and Industry Rank. It is ranked #71 out of 95 ETFs in the Technology Equities ETFs group.
Global X FinTech ETF (FINX)
FINX seeks to invest in companies on the leading edge of the emerging financial technology sector, which encompasses a range of innovations helping to transform established industries like insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. The ETF seeks to provide investment results that correspond to the performance of the Indxx Global FinTech Thematic Index.
FINX has $795.4 million in AUM and an expense ratio of 0.68%. Although the fund does have international exposure, nearly 57% of its assets are in the United States. The ETF has an MSCI ESG Fund Rating of BBB, based on a score of 5.17 out of 10.
The fund currently holds 34 companies with weightings of 58.4% to the Diversified Financial Services industry, followed by allocations of 34% and 3.3% to the Application Software and Consumer Finance industries, respectively. The top 3 holdings of the fund are SQ, Afterpay Limited (APT AU) and Adyen NV (ADYEN NA), with the weights of 8.4%, 7%, and 6.8%, respectively.
FINX has gained 29.3% so far this year to close yesterday’s trading session at $39.27. The ETF witnessed a net inflow of $133.4 million in the past six months and is up nearly 35.7% in the same period. Moreover, the fund recently hit its 52-week high of $60.25.
It’s no surprise that FINX is rated a “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and Peer Grade, and a “B” for Buy & Hold Grade. Among the 38 ETFs in the Financial Equities ETFs group, it’s ranked #4.
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ARKF shares were trading at $43.18 per share on Wednesday afternoon, up $1.30 (+3.10%). Year-to-date, ARKF has gained 80.03%, versus a 12.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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