The foundation of fintech is disrupting traditional financial services, and what started as offering consumers easier, more efficient avenues for banking and transferring money is evolving in rapid fashion to include higher-end financial services.
Yes, that can and does include buying and selling equities, crypto trading services, and even disruption of the long-bland insurance industry, but there’s more to the story, and that could underscore long-term opportunity with exchange traded funds such as the ARK Fintech Innovation ETF (ARKF).
ARKF is actively managed, which stands out in an ETF segment full of index-based products. There’s nothing wrong with the funds in the latter camp, but active management can be advantageous when it comes to disruptive technologies, including fintech, because innovative segments and themes evolve at a moment’s notice, requiring attention to adequately capitalize on those changes.
Take the case of syndicated loans. That’s a territory long dominated by Wall Street, once viewed as complex and often off-limits to everyday investors. However, fintech is breathing new life into that space.
“Back in the 1980s and 1990s, banks used an array of manually driven processes to share information with other lenders when they formed a group to provide financing to companies for investment, expansion or acquisitions. Syndication desks mainly used platforms such as Debtdomain in Europe and Asia, and Intralinks and SyndTrak in the US, for posting primary market deal information, conducting bookrunning and issuing invitation letters,” reported Jacqueline Poh for Bloomberg.
In other words, like so many other areas of old guard financial services, syndicated loans are heavy on record keeping and physical paper. That’s a recipe for disruption because that disruption can bring needed efficiencies, potentially increasing profitability in the process.
While ARKF’s current exposure to the fintech-ification of syndicated loans isn’t notable, that could change over time as more companies with related exposure become publicly traded. Further underscoring the potential utility of ARKF over the long haul is that syndicated loans are just one example of more sophisticated financial concepts where banks could be open to more technology and disruption.
“Bankers complain that technology adoption for loans has been slow compared with other markets such as bonds or equities because there’s no standardization and markets within Asia, Europe, Middle East and Africa are fragmented. More platforms could arrive targeting niche segments of the loans market, and some of those could end up being merged into larger entities to bring scale to their business,” added Bloomberg.
For more news, information, and analysis, visit the 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.