Investors are hearing more and more about the financial technology, investment craze. The fintech phenomenon is one that has been recognized within the world of exchange traded funds, as highlighted by the recent launches of dedicated fintech ETFs, such as the Global X FinTech Thematic ETF (NASDAQ: FINX), which debuted in the third quarter.
FINX tracks the Indxx Global FinTech Thematic Index. That new ETF, which is about two-thirds allocated to U.S. stocks, is a mix of traditional financial services companies and technology firms. However, FINX's fintech tilt is obvious as about three-quarters of the ETF's weight is dedicated to data processing and application software companies.
While fintech is a compelling investment opportunity, the term itself is broad, indicating investors should gain clarity before jumping in.
What Is Fintech?
“FinTech is a broad term applied to various digital tools that endeavor to make a financial service or product more accessible, efficient or affordable,” said Global X. “Such technology is often deemed ‘disruptive’ because it upends the conventions of traditional solutions such as in banking and lending, to name a few. FinTech has also, however, empowered longstanding financial services firms to embrace tech-enabled solutions to remain competitive in the 21st century.”
Fintech is a global theme not confined to U.S. borders and FINX reflects as much. Although nearly 70 percent of the ETF's lineup is comprised of U.S. stocks, the ETF features exposure to six other countries, including Germany, Australia and China.
Data suggest fintech investment is booming, indicating FINX is potentially at the right place at the right time.
“Global fintech funding continues to grow. After it hit $19 billion in total in 2015, worldwide fintech funding hit $15 billion by mid-August 2016. The U.S., Europe, and the Asia-Pacific (APAC) region led the way in attracting the most fintech investment,” according to Business Insider.
Cryptocurrencies, crowdfunding, digital payments, peer to peer lending (P2P) and robo advisors are among the expected growth drivers of fintech investment in the coming years.
“Digital payments have become a mainstay in the life of nearly all consumers. Research forecasts that growth in digital payments will climb from $635 billion in 2016 to over $1 trillion by 2020,” said Global X. “Peer-to-peer lending (P2P) is a way for borrowers to access loans online without the intermediary of a traditional bank. Estimates show that the P2P market will be worth nearly $900 billion by 2024.2 P2P borrowers can seek loans for personal use, small businesses, home improvements, automobile financing, home purchases, and more.”
If you’re looking for cool fintech startups and access to top financial institutions, and are sick of attending stuffy corporate conferences, the Benzinga Global Fintech Awards is the event for you. From its first year in 2015, the competition grew to over 250 applicants and over 500 attendees in 2016.
Connect with us on social media — use the hashtag #BZAwards and #Fintech to spread the word!
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