Due to the pandemic, the use of Fintech has increased, with more people adopting contactless payment systems that meet a demand not met by the traditional banking sector.
Consider companies such as Square, Paypal, Apple, and others. Everyone now has a smartphone and internet access, paving the way for Fintech to grow in popularity.
According to surveys, the majority of consumers are dissatisfied with their traditional big banks, hastening the shift to innovative, online-only, tech-driven banking solutions.
Fintech encompasses more than just mobile payments and banking; it also includes budgeting, credit, insurance, lending, mortgages, savings, trading, investing, and other services.
What are Fintechs?
Financial technology (abbreviated Fintech) refers to new technology that aims to improve and automate the delivery and use of financial services.
Fintech, at its core, is used to assist companies, business owners, and consumers in better managing their financial operations, processes, and lives through the use of specialized software and algorithms that are used on computers and, increasingly, smartphones.
The best Fintech ETFs for 2023
Investing in Fintech ETFs can be a great way to diversify your portfolio and benefit from the growth of the Fintech industry.
With so many options available, deciding which ETF is best for you can be difficult. Here are the top Fintech ETFs for 2023.
1. FINX– Global X Fintech ETF
The oldest fund in this space, FINX from Global X, has more than $1 billion in assets. The fund invests in companies that generate the majority of their revenue from Fintech, such as insurance, wealth management, payment solutions, lending, crowdfunding, blockchain, and others, in developed markets around the world.
The fund is market cap weighted, so it favors the United States at 65%, followed by Australia at 15%. Square, Paypal, Intuit, Fiserv, and other companies are among the top ten holdings. FINX has 40 holdings and a 0.68% expense ratio.
2. ARKF– ARK Fintech Innovation ETF
ARKF is a fintech ETF from Cathie Wood’s popular ARK Invest. ARK has seen massive capital inflows recently, for better or worse, as a result of its stellar performance in 2020. ARKF is actively managed, which means that managers can choose and weigh constituent stocks as they see fit. ARK is primarily interested in “disruptive” businesses.
ARKF debuted in early 2019 and has since amassed assets worth more than $4 billion.
ARKF’s geographical exposure differs slightly from that of FINX. It is also exposed to the US to about 65%, but it is followed by Hong Kong (18%), Singapore (4%), and Japan (3%). The top ten holdings also differ. ARKF owns more than 10% of Square, as well as more than 3% of Paypal, Zillow, Pinterest, and Shopify.
Active management at ARKF is charged a higher fee of 0.75%.
3. IPAY– ETFMG Prime Mobile Payments ETF
IPAY focuses solely on mobile payments stocks within Fintech, including payment infrastructure, processing, services, and solutions. Under the fintech umbrella, this narrow segment is typically regarded as having the most promise. Surprisingly, the assets of this fund exceed $1 billion.
Visa, American Express, Mastercard, Square, and Discover are among the top ten holdings.
This narrow focus comes at a price; IPAY charges 0.75%.
4. TPAY– Tortoise Digital Payments Infrastructure Fund
TPAY is very similar to IPAY, but it weighs its holdings roughly equally, so it’s not as heavily skewed to the big credit card providers like Visa, Mastercard, and so on, even though those names are still in the top ten. No single company accounts for more than 5% of the fund’s assets.
With only about $11 million in assets, TPAY is much less popular, but it is also much cheaper, with a 0.40% fee.
5. EMFQ- Amplify Emerging Markets FinTech ETF
The investment seeks investment returns that, on average (before fees and expenses), correspond to the price and yield of the EQM Emerging Markets Fintech Index (the “index”).
The index is intended to track the performance of equity securities (common stock and depositary receipts) issued by companies in emerging and frontier markets that generate at least 50% of their revenue from Fintech.
At least 80% of the bond fund net assets (including investment borrowings) will be invested in securities similar to those in the index. It is not diverse.
6. FNTC- Direxion Daily FinTech Bull 2X Shares
This leveraged ETF seeks a daily return that is 200% of the return of its benchmark index. For periods longer than a day, the fund should not be expected to provide two times the cumulative return of the benchmark.
Direxion is on your side, whether you’re a bull or a bear. Its leveraged ETFs are powerful tools designed to assist you:
- With daily 2X leverage, you can magnify your short-term perspective.
- With bull and bear funds for both sides of the trade, go where there is an opportunity; and
- Maintain agility by having liquidity to trade in rapidly changing markets.
Leveraged and inverse ETFs pursue daily leveraged investment objectives, which makes them riskier than non-leveraged alternatives.
They seek daily objectives and should not be expected to track the underlying index for more than one day. They are not appropriate for all investors and should only be used by those who understand leverage risk and actively manage their investments.
7. KOIN- Capital Link Global Fintech Leaders ETF
The Capital Link Global Fintech Leaders ETF (KOIN) seeks to track the performance of the AF Global Fintech Leaders Index before fees and expenses.
The index was created to capture the performance of diversified exposure to companies that use or are involved in fintech technology innovations.
To achieve this exposure, the index divides its portfolio holdings into two categories:
- Digital asset providers
Companies that use technology to improve operational sciences, optimize settlement processes, improve customer experience, enhance data security/integrity, and create digital assets.
- Solution providers
Companies that help financial services businesses and organizations adopt and implement cutting-edge technologies and applications.
8. BLOK- Amplify Transformational Data Sharing ETF
BLOK is intended to provide investors with access to approximately 50 blockchain technology companies as well as firms that provide indirect crypto exposure.
This includes cryptocurrency exchange Coinbase Global Inc. (COIN), firms like Microstrategy Inc. (MSTR) with a corporate war chest heavily invested in Bitcoin, and various software and service stocks working on blockchain applications throughout the digital economy.
I hope this blog post has been helpful in providing you with valuable information about Fintech ETFs that could be beneficial for your investment goals in 2023.