The New Epicenter of the Digital Wallet Revolution: 'ARKF'

Many investors are already familiar with digital wallets thanks to Cash App and Venmo, which come courtesy of Square (NYSE: SQ) and PayPal (NASDAQ: PYPL). With those names garnering increasing attention, so is the idea of digital wallets as an investable theme.

Among exchange traded funds, the ARK Fintech Innovation ETF (NYSEARCA: ARKF) is one of the strongest avenues to digital wallet exposure.

Customers and investors are familiar with Cash App and Venmo as ways of transferring money, but the reality is that the digital story is rapidly expanding. That expansion carries considerable investment implications.

“If digital wallets were to become consumer financial dashboards, ARK estimates that the net present value associated with their financial service revenues will exceed $10,000 per average US user,” according to ARK research.

Digital Wallets Are Disrupting the Financial Services Industry

Payments are increasingly going digital, with a number of start-ups seeking venture capital seed money to help facilitate online purchases. According to the research company Pitchbook, data shows that investors put $18.5 billion into the payment processing sector in 2018–an increase of five times the previous year.

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.

Digital wallets even offer utility beyond financial services.

“Beyond financial services, digital wallets could become lead generation platforms for offline and online commerce, potentially adding another $9,000-$10,000 to the net present value of their revenues,” notes ARK.

ARKF 1 Year Performance

Boding well for the long-term ARKF thesis is that digital wallet users should be valued at the same rate as traditional bank customers, but that’s currently not the case. Plus, it’s cheaper for Venmo and Cash App to acquire new customers.

“According to ARK’s research, if each of the estimated 230 million US digital wallet users were valued at $19,900 in 2025, the US digital wallet opportunity would be worth $4.6 trillion,” adds ARKF’s issuer.

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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.