The Global X FinTech Thematic ETF (NasdaqGM: FINX) is up nearly 25% year-to-date, easily outpacing traditional financial services exchange traded funds along the way. That underscores the potency of the fintech investment theme and there are more catalysts to consider.
FINX targets companies on the leading edge of emerging financial technology industry, which includes a range of innovations that caters toward businesses engaged in insurance, investing, fundraising and third-party lending through unique mobile and digital solutions.
“The US FinTech industry is on a positive growth trajectory due to healthy economic trends and beneficial secular changes that results in a revenue opportunity for global payments that exceeds $2 trillion,” said Fitch Ratings in a recent note.
FINX, which is nearly two years old, tracks the Indxx Global FinTech Thematic Index. The ETF holds 36 stocks from nearly 10 industry groups, including data processing, applications software, Internet software and services and consumer finance.
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Growth Areas of Fintech
Electronic and mobile payments are expected to be key drivers of fintech growth in the coming years.
“The payments (including money transfer) segment is a key area within the broader FinTech universe that is benefiting from these trends. We expect a favorable economic backdrop, the continued shift to digital payments, increased e-commerce penetration and strong fundamentals for many firms in FinTech to support credit fundamentals in the coming years,” according to Fitch.
The $311.6 million FINX “encompasses a range of innovations helping to transform established industries like insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions,” according to Global X.
“Robust cash generation, healthy balance sheets and the still relatively low cost of debt are supporting M&A activity. Buybacks also remain a primary use of capital for companies, particularly larger issuers such as Visa and Mastercard that are flush with cash. We expect FCF trends to remain strong across the industry, supported by healthy fundamentals, low capital intensity, limited working capital requirements and benefits from US tax reform,” according to Fitch.
FINX charges 0.68% per year, or $68 on a $10,000 investment.
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