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…
Read More: 4 Top Fintech ETFs to Buy Now