Increasing Use of Mobile Payments Puts Fintech ETFs in Focus

While the best days of the famed FAANG (Facebook, Apple, Amazon, Netflix, Google) stocks may have been missed by investors, it’s important to note where the next growth spurt could be in the technology sector. One area to take note of is the mobile payments sector, which Apple is embracing wholeheartedly.

“During the Q3 earnings call, Tim Cook reported that Apple Pay is completing 1 billion transactions per month, nearly double the amount from a year ago. Much of this growth can be attributed to China,” noted REX Shares president Scott Acheychek in an email.

“According to Bain 10% of U.S. consumers used mobile payments last year, whereas China’s adoption rate is 80%,” he added. “While WeChat Pay and Alipay have a huge lead in China’s mobile payment landscape, Apple Pay has quietly gained 17% market share.”

The payment processing space is seeing a growing number of big bets placed by venture capitalists, which could give financial technology exchange-traded funds (ETFs) a boost. It’s a $1.9 trillion industry that the largest tech firms are trying to tap into.

Payments are increasingly going digital with a number of start-ups seeing venture capital seed money to help facilitate online purchases. According to 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.

That influx of investment capital was spread over 235 deals compared to 258 in 2017. China’s Ant Financial was responsible for raising $14 billion in 2018, which shows its confidence in the payment processing space.

A number of mergers and acquisitions have already taken place, such as the following:

  • Stripe raised a total of $345 million in its latest investment round at a $22.5 billion valuation.
  • Try-before-you-buy payments firm Klarna recently closed a $100 million internal round of investing.
  • GoCardless got a $75 million cash injection from Alphabet and Salesforce.

Earlier this year, international financial services provider Fidelity National Information Services agreed to purchase payment processing company Worldpay for $34 billion, making it the biggest deal thus far in a rapidly-expanding space that could put fintech exchange-traded funds (ETFs) in play.

ETFs to look at in the growing fintech space include the Global X FinTech ETF (NasdaqGM: FINX) and the ARK Fintech Innovation ETF (NYSEArca: ARKF). Both ETFs are up year-to-date–FINX is up 22 percent and ARKF is up 5 percent.

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.

For more market trends, visit ETF Trends