The tectonic shift to online from physical banking is glaring. The rapid spread of devices like smartphones, emergence of big data analytics and the propensity to choose hassle-free and less time-taking banking are behind this trend.
As a result, Fintech or financial technology is gaining immense popularity. Mobile banking, mobile trading on commodities exchanges and digital wallets are some examples of financial technology, going by Investopedia. With this, the efficiency of financial services is being enhanced and users are being better-serviced.
One fund issuer Purefunds stated that this emerging FinTech segment expanded as much as about 75% in 2015. Another issuer, Global X, pointed to the fact that digital payments are expected to expand 58% from $635 billion in 2014 to $1 trillion in 2019. Peer-to-peer lending skyrocketed 128% from 2014 to 2015.
The validity of these data can be understood by the rapid closure of big U.S. bank branches. Bank of America, Citigroup and JPMorgan shut down 389 branches since the third quarter of 2015. Bank of America has reduced it to just 4,629 from the pre-recession level of more than 6,000 due to a migration toward “digital channels, mobile, online, and ATM.” As per its Q3 earnings report, 18% of deposit transactions are done via mobile devices.
Investors can definitely win out of this trend by investing in the below-mentioned ETFs.
Purefunds Solactive Fintech ETF FINQ
The $2.4-million fund looks to track the Solactive FinTech Index and offers investors exposure to technological innovation across the financial sector. The fund holds about 31 stocks. None of the stocks holds more than 3.61% of the basket. Pegasystems, Ellie Mae and Corelogic are the three top companies of the fund. The fund charges about 68 bps in fees (read: Fintech ETFs Head to Head: FINQ vs. FINX).
The fund focuses on smaller-cap stocks with about 40% exposure followed by 22% exposure in mid-cap stocks and 16% in large-cap stocks. Growth stocks mainly dominate the fund, accounting for about 65% of exposure. Domestic stocks account for about 72% of the fund. The fund has 25.2% exposure to investment management followed by 16.1% focus on general financial services solutions and 13% on market provisioning.
FinTech Thematic ETF FINX
This $1.5-million fund also looks to track companies belonging to the emerging financial technology sector. The top three holdings are First Data (6.49%), SS&C Technologies (6.03%) and Paypal Holdings (5.97%). The 29-stock fund puts about 42% weight in the data processing & outsourced services while application software (35.5%) and Internet software & services (6.8%) round out the next two spots.
The U.S. has about 67.6% exposure to the fund followed by Germany (8.00%) and Switzerland (6.94%). Growth stocks account for about 72% of the fund. The fund charges 68 bps in fees (read: 3 Thematic ETFs from Global X Hit the Market).
Purefunds ISE Mobile Payments ETFIPAY
This ETF tracks the ISE Mobile Payments Index to provide exposure to the performance of companies engaged in the mobile/electronic payments business. This approach results in the fund holding a basket of 35 stocks.
Processors dominates the fund with about 34% exposure, followed by Infrastructure and Software with 28.8% focus, Cable Networks with about 19.4% exposure and 17.8% in Solutions (read: Play Mobile Payments & Big Data with 2 New ETFs).
As far as geographical concentration is concerned, the fund is heavy on the U.S. with about 84% focus followed by France (3.45%) and Germany (3.01%). The fund charges 75 bps in fees and has amassed about $11.2 million in assets.
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PF-SOLACTIVE FT (FINQ): ETF Research Reports
PF ISE MOBLPAY (IPAY): ETF Research Reports
GLBL-X FINT THM (FINX): ETF Research Reports
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