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Fintech ETFs Head to Head: FINQ vs. FINX

Sanghamitra Saha

Financial technology or “FinTech” is gaining immense popularity of late, courtesy of increased usage of technology in financial transactions. Initially, FinTech was restricted to certain areas like payment processes. But it has now widened to include several other applications in the financial sector.

Mobile banking, mobile trading on commodities exchanges and digital wallets are examples of technological applications in the financial space, per investopedia. With this, the efficiency of financial services will be enhanced and users will be better served (read: New ETF That Promises Technological & Financial Bliss).

Growth of Fintech

Technology is spreading rapidly across every sphere of business today, the financial sector being no exception. Purefunds stated that this emerging FinTech segment expanded about 75% in 2015 and is thus a lucrative investment destination at the moment.

Investopedia also indicated that four broad categories including B2B for banks, their business clients, B2C for small businesses and consumers primarily avail FinTech. Meanwhile, Global X pointed to the prospective growth areas in this space. As per Global X, 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.

Purefunds Solactive Fintech ETF FINQ

The fund looks to track the Solactive FinTech Index and offers investors exposure to the technological innovation across the financial sector. The fund holds about 31 stocks. As of September 21, 2016, none of the stocks holds more than 3.22% of the basket. Square, Zillow Group and Envestnet are the three top companies of the fund. The fund charges about 68 bps in fees.

The fund focuses on smaller-cap stocks with about 60% 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 the exposure. Domestic stocks account for about 75% of the fund (read: Why Small-Cap Value ETFs Are Winning Picks Now).

The fund has 25.2% exposure to investment management followed by 16.1% focus on general financial services solutions and 13% in market provisioning.

FinTech Thematic ETF FINX

The fund looks to track companies belonging to the emerging financial technology sector, which takes into account a range of initiatives deployed to convert industries like “insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions.”

The top three holdings are First Data (6.20%), SS&C Technologies (5.86%) and Wirecard (5.82%). The 29-stock fund puts about 42% weight in the data processing & outsourced services while application software (35.13%) and Internet software & services (7.3%) round out the next two spots.

The U.S. has about 68% exposure to the fund followed by Germany (7.78%) and Switzerland (7.18%). Growth stocks account for about 65% of the fund. The fund charges 68 bps in fees (read: 3 Thematic ETFs from Global X Hit the Market).

Bottom Line

Be it timing of the launch or the structure of thefund, both the products do not have much difference. Both charge the same expense ratio, mainly focus on the U.S. and have a solid exposure to growth stocks. FINX hit the market this month while FINQ entered the ETF world at August-end. FINQ has amassed about $2.5 million in assets so far while FINX raked in about $1.5 million. However, investors should note that low company specific concentration risks can lend FINQ an edge over FINX.

Want more information on the world of ETFs? Make sure to check out the podcast below where we discuss the investing landscape with Kevin O’Leary and Connor O’Brien of O’Shares Investments:

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