The COVID-19 outbreak has created various socio-economic challenges and has also accelerated the shift towards all-digital platforms and services.
Fintech adoption is one the rise, globally, due to what many consider permanent changes in consumer behavior. Individuals and businesses are conducting more online transactions instead of cash payments in order to prevent the further spread of the virus.
Companies throughout the world are increasingly adopting the latest technologies including cloud computing, cybersecurity and digital commerce solutions. Many of the key Fintech trends or movements were already set to take place before the pandemic began, because emerging technologies (Emtech) like AI, Big Data, and machine learning have the potential to significantly improve existing business operations.
The Coronavirus crisis has also led to the increased use of cashless or contactless payments methods. It’s also opening up new markets for Fintech startups, mainly those that are focused on digital payments.
As reported by MarketWatch, Fintech ETFs have become increasingly popular this year. Square’s SQ and PayPal’s PYPL have been able to outperform rate-sensitive bank ETFs.
The ARK Fintech Innovation ETF (ARKF) has surged by 61.52% in 2020. ARKF is an actively managed ETF that may be preferred by asset managers because of the economic uncertainty created by the pandemic. Overall, more individuals and firms are recommending more active investment strategies instead of automated solutions.
Max Friedrich, analyst at ARK, notes:
“In the US, most customers do not like their banks. In a survey ranking the 100 most popular companies by customer satisfaction, banks took three of the bottom ten places. According to another survey, 71% of Millennials would prefer to visit their dentists than engage with their banks.”
MarketWatch notes that the Global X Fintech ETF FINX has over $690.5 million in assets under management. FINX provides global exposure, as 42% of the fund is allocated to international investments.
Global X states that FINX aims to invest in firms that are focused on Emtech, which is set to transform existing businesses such as fundraising, insurance, investing, and lending by offering innovative digital solutions.
Another Fintech-focused option, Tortoise Digital Payments Infrastructure Fund (TPAY) is a fund that includes many of the same types of exposures as ARKF and FINX. However, TPAY attempts to provide a balance by allocating 9% of its total weight to Mastercard MA, and Visa V, in order to reduce some of the volatility created due to allocations to emerging Fintechs.
In June 2020, George Whitridge from ARK Invest had discussed key Fintech developments in real estate, mobile payments, and ETFs.
In May 2020, Fintech ETFs began recording significant gains as consumers stayed home and shopped via digital commerce platforms (instead of going out due to COVID-19).
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