The coronavirus pandemic is facilitating “new normals” across an array of daily activities with a prime example being how folks spend and move money.
Put another way, the ideas of going into bank branches and using cash in brick-and-mortar stores were already dying slow deaths before the pandemic and that decline is being accelerated by COVID-19. Those scenarios provide long-term benefits to ETFs such as the ARK Fintech Innovation ETF (NYSEARCA: ARKF).
ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
“The volume of ATM cash withdrawals tumbled at least 12% in the second quarter, according to Wall Street research firm MoffettNathanson,” reports Daren Fonda for Barron’s. “Digital payments have ably filled in, and those cash withdrawals are unlikely to return. In fact, the rise of digital payments is one of the few Covid-19 trends all but guaranteed to last long after a vaccine. And that creates significant opportunities for a host of tech-focused payment companies.”
Future Is Cashless
Cards and digital payments are slowly, but surely usurping cash as primary forms of payment, providing a compelling, long-term runway for growth for ARKF investors.
With COVID-19 flaring up again in some regions, contactless payments and the ARKF components with exposure to that theme stand to benefit again. At the industry level, contactless is viewed as a futuristic concept, but integral to the ARKF thesis, that future is now. Contactless payments could see their share of all payments rise 10% to 15% because of the coronavirus. Adding to the case for ARKF is that the idea of digital payments isn’t confined to younger, more tech-savvy generations.
“Millions of seniors, stuck at home, are going cashless for the first time. Retail stores and restaurants are developing online sales channels, while governments worldwide are shifting to cards for disbursements to consumers and businesses,” according to Barron’s.
Data confirm cash is wilting on the payments scene and that’s a boon for many ARKF components.
“Cash represented 26% of all U.S. consumer payments in 2019, according to the Federal Reserve’s latest Diary of Consumer Payment Choice. That’s down from 31% in 2016,” according to Barron’s.
The actively managed ARKF is up 57.27% year-to-date.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.