Capitalize on BNPL Growth with Fintech ETFs & Stocks
As food prices continue to soar in the United States, more Americans are turning to Buy Now, Pay Later (BNPL) options to manage their grocery expenses and stay afloat financially. Research from PYMNTS Intelligence shows that last year, approximately 15 million consumers, accounting for 6.5% of the US population, utilized BNPL installment loans to cover groceries or manage weekly food expenses, as quoted on Yahoo Finance.
Among these users, about 5.4% were low-income households. Interestingly, even higher-income earners, those making over $100,000 annually, are joining the trend, albeit to a lesser extent.
Reasons Behind the Trend
Experts attribute the growing popularity of BNPL options to the increasing cost of living, making it challenging for inflation-hit people to make ends meet. By spreading out payments over time, BNPL provides a short-term solution to financial strain.
Although food prices saw a slight moderation in February, they remain significantly higher than pre-pandemic levels. Hence, half of consumers earning over $100,000 reported cutting back on nonessential spending at grocery stores.
In the holiday season too, younger shoppers apparently used buy-now-pay-later (BNPL) services to stretch their budgets, according to the Adobe report, as quoted on Reuters. This is quite expected as inflation has been leaving a dent in consumers’ pockets.
BNPL as a Financial Tool
Individuals are resorting to BNPL options to manage food expenses, as evidenced by social media posts showcasing users paying off takeout orders and restaurant meals in four equal installments.
Benefits of BNPL Service to Retailers & Consumers
Increased Spending: Retailers have noticed that offering BNPL can lead to an increase in average order value. When customers know they can spread the cost over time, they may be more likely to add more items to their cart.
E-Commerce Growth: The rise of online shopping has been a driving factor for BNPL. Online retailers integrate BNPL options right at the point of sale.
Rise of Mobile Shopping: BNPL apps are mobile-friendly. They fit well with the busy lifestyle of modern consumers.
Better Accessibility Than Credit Cards: BNPL services often have lower eligibility requirements compared to traditional credit options. This accessibility can attract a broader customer base, those with less reputable credit histories.
BNPL Better Than Credit Cards: BNPL does not have associated fees like processing fees or annual fees. On the other hand, credit cards include certain charges like processing, joining and annual fees. This makes BNPL a better alternative to low-income earners.
Competitive Pressure: As more retailers adopt BNPL, there’s competitive pressure for others to do the same in order to keep up and meet consumer expectations.
ETFs in Focus
The trend along with chances of a less-hawkish Fed make some payment ETFs well-positioned. Here’s are the options you can play now.
Global X FinTech ETF (FINX)
The underlying Indxx Global FinTech Thematic Index invests in companies on the leading edge of the emerging financial technology sector, which encompasses a range of innovations helping to transform established industries like insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. The fund charges 68 bps in fees.
ARK Fintech Innovation ETF (ARKF)
The fund looks to offer exposure to fintech stocks. A company is deemed to be engaged in the theme of Fintech innovation if (i) it derives a significant portion of its revenue or market value from the theme of Fintech innovation, or (ii) it has stated its primary business to be in products and services focused on the theme of Fintech innovation. The fund charges 75 bps in fees.
ETFMG Prime Mobile Payments ETF (IPAY)
The underlying Prime Mobile Payments Index provides a benchmark for investors interested in tracking the mobile and electronic payments industry, specifically focusing on credit card networks, payment infrastructure and software services, payment processing services, and payment solutions. The fund charges 75 bps in fees.
Stocks in Focus
As far as stocks are concerned, investors can play the below-mentioned stocks.
Block (SQ)
The Zacks Rank #1 (Strong Buy) company offers financial and marketing services through its comprehensive commerce ecosystem that helps sellers to start, run and grow their businesses. The company has a dominant position in the BNPL market. The company hails from an industry (top 35%) and sector (top 31%) that have upbeat Zacks Ranks.
Affirm (AFRM)
Affirm Holdings is an emerging growth company. They are building the next generation platform for digital and mobile-first commerce. The stock has a Zacks Rank #3 (Hold).
Mastercard (MA)
The Zacks Rank #3 company is a leading global payment solutions company that provides an array of services in support of credit, debit, mobile, web-based and contactless payments, and other related electronic payment programs to financial institutions and other entities. The company’s effort to involve more partners to strengthen its BNPL program has been noteworthy. The company comes from an industry (top 14%) and sector (top 31%) that have upbeat Zacks Ranks.
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Mastercard Incorporated (MA) : Free Stock Analysis Report
Block, Inc. (SQ) : Free Stock Analysis Report
Global X FinTech ETF (FINX): ETF Research Reports
Amplify Mobile Payments ETF (IPAY): ETF Research Reports
ARK Fintech Innovation ETF (ARKF): ETF Research Reports
Affirm Holdings, Inc. (AFRM) : Free Stock Analysis Report
