It’s easy to get mired in the ebb and flow of the short-term stock market fluctuations and lose sight of the long-term trajectory. That’s been the case with fintech, which has had a rough first half of 2022, but the industry continues to evolve, which should still make the sector a prime play for growth.
Not too long ago, fintech was hailed amid social distancing measures brought on by the pandemic, which saw broad appeal for technology stocks that could thrive in a changing world. One such change was the rise of digital payments to quell the increased need to purchase goods and services online.
As such, fintech companies ballooned to lofty valuations before coming back down to earth starting in late 2021. However, the long-term growth opportunity for fintech still exists with companies like PayPal evolving and creating new products to power the industry.
“PayPal was one of the early indirect beneficiaries of the pandemic’s economic response, when consumers who were skittish about in-person transactions migrated quickly to PayPal and Venmo, creating a higher-than-normal rate of account growth,” an American Banker article said.
“PayPal has continued its strategy of building a financial super app, including services such as a point of sale credit product that extends terms for larger purchases,” the article added.
“While we are focused on incorporating more discipline into our operating model and driving operating leverage in our business, we are simultaneously investing to grow,” said Paypal CEO Dan Schulman during the company’s first-quarter earnings report. “We see opportunities to accelerate our growth and customer engagement.”
Growth Exposure via Fintech
PayPal is one of the holdings of the Global X FinTech ETF (FINX). The fund gives growth-hungry investors targeted exposure to the fintech industry as opposed to taking a more broad approach with a tech-focused fund.
FINX seeks to provide investment results that correspond to the Indxx Global Fintech Thematic Index. The index is designed to provide exposure to exchange-listed companies in developed markets that provide financial technology products and services, including companies involved in mobile payments, peer-to-peer (P2P) and marketplace lending, financial analytics software, and alternative currencies, as defined by the index provider.
The fund gives investors exposure to:
- High growth potential: FINX enables investors to access high growth potential through companies that are applying technological innovations to disrupt and improve the delivery of financial services.
- An unconstrained approach: The fund’s composition transcends classic sector, industry, and geographic classifications by tracking an emerging theme.
- ETF efficiency: In a single trade, FINX offers access to dozens of companies with high exposure to the fintech theme.
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