International financial services provider Fidelity National Information Services agreed on Monday 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.
“Powered by innovations within mobile, artificial intelligence, and blockchain technology, companies within fintech are working to disintermediate or bypass incumbent financial players and challenge traditional institutions by offering new solutions that are better, cheaper, faster, and more novel and secure,” stated ARK’s Founder and Chief Executive Officer, Catherine Wood.
“Fintech reimagines the generation, transfer, and storage of value in today’s increasingly digital economy, and its impact will extend across every industry. Through facilitating peer-to-peer transfers, gifting, intermediary products, and other non-GDP related economic activity, the companies in ARKF, in our view, will touch more than the $80 trillion in GDP today,” Wood added.
Contactless payment systems typically fly under the radar, but more popular applications like Apple Pay are drawing more attention to the industry. Prior to the FIS purchase, Fiserv agreed to buy payment processor First Data for about $22 billion earlier this year.
The purchase of Worldpay would give FIS a large footprint in the e-commerce market given that the former is responsible for facilitating 40 billion transactions per year.
“Scale matters in our rapidly changing industry,” said Gary Norcross, FIS’s chairman and chief executive in a statement.
According to the broad terms of the deal, FIS will pay 0.9287 of a share and $11 in cash for every share of Worldpay.
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Other ETF Plays
Will the burgeoning fintech space cause cyclical sectors to overtake defensive sectors?
For investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.
Conversely, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.
For more market trends, visit ETF Trends