Fintech Cements Status as Disruptive Force, Here's How Investors Benefit

Investors continue hearing more about technological disruption and one of the more tangible, credible examples of that is fintech, which is accessible via 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 challenge of discussing FinTech across financial services is there are so many areas that new entrants—challengers or vendors—are trying to address across traditional asset management, investment, commercial banking, retail banking, active investor brokerage accounts, wealth management, payments, settlements, trading, and even asset servicing and custody,” notes FactSet Research.

ARKF member firms are companies are powered by innovations and are working to disintermediate or bypass the current financial markets and challenge traditional institutions by offering new solutions that are better, cheaper, faster, and more novel and secure.

Futuristic Fintech

“For the last many years, FinTechs have been driving after these new, foundational transformations in the industry, storming the castle with new technology and new approaches. Those who are delivering great solutions, solving real business challenges, and providing great client service are finding longevity in the market. Others whose execution has not been able to live up to the rhetoric find themselves acquired by incumbents or simply shuttered,” according to FactSet.

Fintech allows financial firms to leverage cutting edge technology to reduce costs, improve decision making and risk controls, remove middlemen and enhance customer experiences. A thematic approach includes investments that stand to benefit from structural change driven by demographic and technological changes.

Obviously, fintech is a growth, not a value, proposition, but some data points suggest markets are undervaluing digital wallets and mobile payments, among other fintech concepts, and that could spell opportunity for ARKF investors.

The payment processing space is seeing a growing number of big bets placed by venture capitalists, which could give financial technology ETFs a boost. It’s a $1.9 trillion industry that the largest tech firms are trying to tap into.

“However, the FinTech revolution has also started a counter-revolution among financial firms of all sizes to take on a start-up mindset and think differently about how they build products and infrastructure—taking on development methodologies like Agile, DevOps, cloud-first, and building development teams to drive the business,” notes FactSet.

For more on disruptive technologies, visit our Disruptive Technology Channel.

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.