Among thematic exchange traded funds, the ARK Fintech Innovation ETF (NYSEARCA: ARKF) is ascending to star status this year and the move away from cash, hastened by the coronavirus pandemic, is a big reason why.
Importantly, the move to cashless and contactless payments isn’t going to abate when the coronavirus is defeated. Demographic tailwinds could see to this being a move with major long-term implications.
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.
“Before we can think about a cashless future, however, we have to understand our present habits. Fewer than one in five respondents (16%) said they always carry cash, while 27% said they carry it most of the time, and 37% responded ‘sometimes.’ When Americans do have cash on their person, they’re carrying an average of $46,” according to a survey by Travis Credit Union.
How A Decline in Cash-Carrying Benefits Fintech
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.
“Perhaps unsurprisingly, millennials are least likely to have bills in their wallet at any given time: 40% said they carry it most or all of the time, compared to 45% of Generation X and 59% of baby boomers. But while boomers are most likely to carry cash, they’re also carrying the least, with just $42 in their wallets, on average,” notes Travis Credit Union.
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.
Vital to the ARKF thesis is that while many folks carry cash, they actually prefer other forms of payment.
“Despite a majority of respondents having cash in their wallet at the time of survey (92%), most don’t like to use it. Just one in three said they prefer to use cash to pay for goods. Of those, more than half (54%) said they do so because of the privacy and security that cash offers. One in three said it’s simply because cash is most widely accepted, and 14% do so in order to stay within their budget rather than risk overspending,” notes the credit union.
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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.