It’s not just the U.S. that is seeing seismic shifts on how folks pay bills, each other, conduct banking, and other basic financial services. Fintech shifts on an international scale are supportive of ETFs, such as the ARK Fintech Innovation ETF (NYSEARCA: ARKF).
In fact, ARKF is particularly meaningful when it comes to ex-US fintech exposure because as an actively managed fund, AKR’s managers can address international fintech opportunities more readily than index-based rivals.
A recent report by Moody’s Investors Service indicates that over the course of the coronavirus pandemic, some European countries with previously low penetrations of digital payment transactions are experiencing surges on that front.
“Most European banks reported growth in their customers’ use of mobile apps and online banking platforms in the first quarter of 2020,” said Moody’s. “They experienced increased customer interactions via online chats and emails as well as higher percentages of new clients onboarded digitally. Digital payments, sales of digital products as well as mobile application downloads also rose.”
ARKF Properly Positioned
ARKF is already levered to the ex-US fintech theme as four of its top 10 holdings are international companies. International firms dot the fund’s 30 other components, including some with exposure to Europe. As is the case in the U.S., many international banks are playing catch-up against pure-play fintech companies.
“Banks rapidly developed and rolled out online services to support clients – small businesses in particular – through the unprecedented liquidity squeeze caused by the crisis,” according to Moody’s. “Many banks have offered end-to-end digital applications for payment moratoriums, digital processing of loan applications including loans benefitting from government guarantee programs. Some banks upgraded their digital platforms and broadened use of e-signature projects.”
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. ARKF’s allocation to Square also gives the fund some bitcoin exposure.
Twenty-eight percent of ARKF components are considered transaction innovators while 23% are proprietors of customer-facing platforms. Another 17% drive frictionless payment systems, one of the fastest-growing fintech segments.
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.