The way cashless payments are growing, it may no longer be necessary to own a wallet or a purse. This trend, especially in emerging markets (EM) can fuel EM-focused funds like the Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ).
One of the leading purveyors in cashless payments is China. It’s readily apparent that mobile payment options are trending to the upside.
“Visitors to China will quickly observe that the country is rapidly transforming into a cashless society,” the fund noted in an email. “Alibaba (BABA), through its affiliation with Ant Financial and its Alipay payments platform, and Tencent, through its WeChatPay platform, dominate the Chinese payments landscape. A recent Brookings paper looks at and explains the differences between the U.S. and Chinese model and explores the future of the payments industry.”
Given the sheer size of China, the numbers are staggering, but the rate of growth is even more impressive.
“From virtually zero a decade ago, online payments in China have soared,” the fund said. “Mobile payment volume in China soared to over $41 trillion during 2018, according to the Brookings report. Both Alipay and WeChat Pay have over 1 billion users each. Over 90% of the Chinese population use one of the two platforms as their primary payment method. QR codes are ubiquitous in China. From large department stores to stands in a local market, online payments are the mode of exchange. Even panhandlers accept Alipay and WeChat Pay.”
The growth of cashless payments is doing wonders for their ecommerce sector in general. It’s only a matter of time before the rest of the world adopts the trend and global growth will become apparent.
Needing Emerging Markets
“From zero, China has emerged as a powerhouse in the global payments industry,” the fund noted. “Cultural differences have created two significantly different payment systems. However, the Chinese model has been instrumental in facilitating the growth of eCommerce in China and is likely to continue to do so in the future.”
EMQQ tracks an index of leading Internet and eCommerce companies serving Emerging Markets. It seeks to offer investors exposure to the growth of online consumption in the developing world. EMQQ holdings operate in diverse markets such as India, China, Brazil, Turkey, Nigeria, and Indonesia, to name a few. To be included, the companies must derive their profits from Ecommerce or Internet activities and include search engines, online retail, social networking, online video, e-payments, online gaming, and online travel.
EMQQ is up 16.44% year-to-date, according to Yahoo Finance performance figures.
For traders, leveraged opportunities within EM can be utilized with the Direxion Daily MSCI Emerging Markets Bull 3X Shares (NYSEArca: EDC) ETF. EDC seeks daily investment results, before fees and expenses, of 300 percent of the daily performance of the MSCI Emerging Markets Index.
The fund invests at least 80 percent of its net assets in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is designed to represent the performance of large- and mid-capitalizations securities across 24 emerging market countries.
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