Some thematic ETFs are displaying some utility for investors amid the challenging backdrop created by the COVID-19 pandemic. Fintech funds, such as the Global X FinTech ETF (NasdaqGM: FINX), top that list.
FINX seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Fintech Thematic Index. The underlying 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.
Fintech allows financial firms to leverage cutting edge technology to reduce costs, improve decision making and risk controls, remove middlemen and enhance customer experiences. A thematic approach includes investments that stand to benefit from structural change driven by demographic and technological changes.
While the coronavirus outbreak is bolstering the use of technologies such as Zoom meetings, Skype, Slack, Google Hangouts and more, fintech is getting a virus lift, too.
“This new era has also been evidenced this week with a staggering 72 percent jump in the use of our fintech [financial technology]apps from existing clients and a sharp increase in inquiries from potential ones,” said James Green, deVere Group’s Divisional Manager of Europe, in a note out Monday.
FINX In Focus
Electronic and mobile payments are expected to be key drivers of fintech growth in the coming years and it appears some market observers are awakening to the potential offered by some FINX holdings. That’s an important trend at a time when businesses and clients are reluctant to transact in cash for fear of transmitting the coronavirus.
“It can be expected that due to the Coronavirus pandemic and the steps being taken to combat it, this move towards fintech will be significantly accelerated,” said Gren. “Fintech is fast becoming the new normal.”
One issue faced by investors considering thematic ETFs, such as FINX, is what are the current levels of adoption of the underlying theme. Data suggest that while scores of other themes are potentially compelling over the long-term, penetration rates among consumers are currently low. That is not the case with the fintech.
Coronavirus has forced rapid changes in the way business is conducted and how payments are transmitted and those shifts could be sticky and impactful for the fintech industry.
“The world has changed in the last few weeks. The measures we’re now all taking to help the fight back against coronavirus are affecting the way we interact, live, work, and take care of our finances,” notes Green.
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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.