More Payments Evolution Is Coming, Boosting Case for Fintech ETF

The ARK Fintech Innovation ETF (NYSEARCA: ARKF) is at the center of some seismic shifts in the financial services industry and in a testament to the fund’s growth prospects, that list is getting longer.

While financial technology, or fintech, might still be in its nascent stages, this means investors looking to capitalize on the space need to exercise due diligence.

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. Integral to the long-term ARKF thesis is the ability of fintech companies to forge into new frontiers, something ARKF components are doing.

“According to Brian Brooks, The Office of the Comptroller of the Currency (OCC) is rolling out a ‘payments charter 1.0’ this fall,” writes ARK analyst George Whitridge in a recent note. “Today payment companies such as Square and PayPal must apply for Money Transmission Licenses in each state to move funds to and from sellers and consumers. Companies often spend millions of dollars applying for money transmission licenses, with approval in states like California, Texas, and New York taking up to 12-24 months. A potential game-changer, the OCC’s payments charter will supersede state licenses and offer nonbank payment providers a national platform.”

Growth Drivers

A company considered to be engaged in the theme of Fintech innovation if it derives a significant portion of its revenue or market value from the theme of Fintech innovation, or it has stated its primary business to be in products and services focused on the theme of Fintech innovation, according to ARK Invest.

“A national payments charter could encourage more innovation and competition in the payments space, especially as the OCC adds more features and functionality,” notes Whitridge. “According to Brooks, version 2.0 of the payments charter could include direct access to the Federal Reserve’s real-time payment network and settlement service FedNow. The OCC plans to roll out version 2.0 in 2023 or 2024.”

The OCC charter proposal could be a boon for ARKF and the broader fintech industry.

“In our view, the OCC’s proposed charters will be positive for the fintech industry, facilitating innovative business models, saving on card processing fees and, ultimately, enabling companies to transform cost centers into revenue drivers,” according to Whitridge.

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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.