Financial marketsFintechA Guide to Fintech Exchange Traded Products (ETPs)

Kennnedy MuturiDecember 6, 20219610 min
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The world is currently heading towards digitization, putting technology in a stronger position in the financial industry. The global financial technology industry, which is predicted to increase at a CAGR of 23.4 percent between 2021 and 2026, is also highlighted in a Market Data Forecast (MDF) research. Fintech is predicted to achieve a market value of $324 billion by 2020, according to the research. Providers have been able to focus on a more customer-centric approach because of the mix of financial services and technology. According to an MDF research, the combination gradually improves or replaces traditional financial services methods in various industries, including payments, digital lending, insurance, ecommerce, banking, wealth management, and social commerce.

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 Fintech is being driven by the rise of cutting-edge technologies such as artificial intelligence (AI), cloud computing, big data, the Internet of Things (IoT), and machine learning. Smartphone adoption, greater demand for industrial automation, and expanded use of wireless communication are all accelerating the shift to digital platforms.

Traditional businesses are feeling the heat of increasing digitization and are looking for partnerships with Fintech companies. According to a Mordor Intelligence analysis, several central banks, insurers, and investment managers are aiming to partner with financial technology businesses during the next three to five years. According to the research, these companies expect a 20 percent average return on investment in innovation projects.

According to a Mordor Intelligence analysis, Fintech organizations embrace infrastructure-based technology through platform fiction and open application programming interfaces (APIs). According to the survey, the Fintech industry is seeing operational breakthroughs because of robotic process automation (RPA), chatbots, and Distributed Ledger Technology (DLT), allowing for more agility, efficiency, and accuracy.

Moving on, traditional investment banks and Fintech firms are increasingly incorporating crypto currencies into their products, creating new investment options.

Work from home, expanding digital payments, increased video streaming, and soaring video game sales are all examples of ‘new normal’ tendencies that have evolved due to the health crisis. Because people remain home and purchase online for all basics, notably food, the pandemic is also a windfall for the e-commerce industry.

Customers are turning to digital payments to pay their bills as their interest in online shopping grows. Simultaneously, businesses and utility companies are increasingly pressing for the same. GOOGLE, a subsidiary of Alphabet, offers payment services. From players such as; Google Pay, Apple’s AAPL, Facebook Pay, Amazon’s AMZN & Apple Pay, the primary winners in the growing movement to digital payments are Amazon Pay, PayPal PYPL, and Square Inc.’s SQ Cash App.

In particular, the number of COVID-19 instances in the United States is on the rise. According to a CNN story, the United States sees an average of 160,000 new COVID-19 cases per day, according to data from Johns Hopkins University. According to a CNN article, the US Centers for Disease Control and Prevention (CDC), Dr. Rochelle Walensky, has advised unvaccinated Americans to avoid travel over the Labor Day weekend. Americans are anticipated to continue making digital payments considering the current circumstances.

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Here are a few Fintech exchange-traded funds (ETFs) that can you benefit from the increasing financial technology market:

 

FINX, the Global X Fintech ETF, has been up 30.5 percent in the last year.

The fund aims to invest in companies at the forefront of the development of the financial tech industry, which includes a wide range of innovations that are helping to transform established industries such as insurance, making investments, fundraising, and third-party lending through innovative mobile and digital solutions. It has a $1.39 billion AUM and charges a fee of 68 basis points. It has a three-month average volume of 177,000 shares traded (read: ETFs to Gain on Solid Q2 Coinbase Earnings).

The ARK Fintech Innovation ETF (ARKF) is up 29.4%.

It’s an actively managed ETF that aims for long-term capital gain. Mobile wallets, digital wallets, peer-to-peer loans, crypto currency, and risk transformation are among the Fintech advances covered by the fund. With $3.71 billion in assets under management, it has a 75-basis point expense ratio (bps). In addition, the fund has a three-month average volume of around a million shares (read: Robinhood Warns on Trading Activity: ETFs in Focus).

IPAY, the ETFMG Prime Mobile Payments ETF, is up 27.4%.

The fund aims to mimic the Prime Mobile Payments Index’s price and yield results as precisely as possible before fees and expenses. The index serves as a benchmark for investors following the mobile and electronic payments business, focusing on credit card networks, payment systems and technology services, payment processing services, and payment solutions (such as smartcards, prepaid cards, virtual wallets). With a $1.29 billion AUM, it has a 75-basis point expense ratio. Furthermore, the fund has a three-month average volume of roughly 90,000 shares (see: ETF Areas in Focus as Delta Variant Cases Rise).

TPAY, the Ecofin Digital Payments Infrastructure Fund, is up 22.3 percent this year.

The fund employs a passive management strategy to track the Ecofin Global Digital Payments Infrastructure Index’s total return performance. With $14.3 million in AUM, it has a 40-basis point expense ratio. It has had an average volume of roughly 812 shares over the last three months.

Kennnedy Muturi

Ken is a Quantitative Trader with experience in investments, quantitative finance, financial modelling and algorithmic trading in Global Investable Markets (GIM). He enjoys using Bayesian Statistics, Time Series and Machine Learning in developing Robust consistent Alphas in Equities Market, FX, ETPs and Derivatives instruments. He enjoys deep dives in understanding High Frequency Trading infrastructures and improving how the African financial markets work. He holds a Bachelor's in Actuarial Science from Strathmore Institute of Mathematical Sciences : An Executive Program in Algorithmic Trading (EPAT) certificate in Algo Trading from QuantInsti : A current MSc student in Financial Engineering at World Quant University.

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