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U.S. Lagging Others in Mobile Payment Adoption

This article was originally published on ETFTrends.com.

Even with the rise of smartphone usage, the U.S. has been lagging when it comes to mobile payments. Compared to other countries like China and India, there’s still much work to do in the U.S.

Per a CNBC report, “Chinese mobile payments, for example, made up more than 80% of all purchases in the country last year, according to management consultancy Bain. In the U.S., major mobile payments apps had adoption rates of less than 10%.”

How does the U.S. compare with other countries? In essence, it’s neither the best nor the worst.

“The U.S. is not a leader when it comes to mobile payments — at best, it’s the middle of the pack compared to other countries,” said Gerard du Toit, partner and head of the banking and payments sector of Bain’s financial services practice in North America.

So why are other countries taking to mobile payment options faster than the U.S.? One reason is because cash was the only alternative in these countries.

“China and India have been very cash-based economies — that has a pretty high hassle and friction factor,” du Toit said. “Mobile payment is a dramatic improvement versus having to manage a whole bunch of cash.”

In markets like the U.S. and Europe, consumers have a plethora of payment options, including debit cards and credit cards. When it comes to paying for items, U.S. and European consumers can whip out their wallets or purses to have access to a variety of payment alternatives.

“There is incredible saturation among debit cards and credit cards in the U.S. and Europe. So people already had a way to pay digitally that isn’t cash,” said Arieh Levi, senior analyst at CB Insights. “In areas where mobile is common, there weren’t really established legacy players already.”

Payments are increasingly going digital with a number of start-ups seeing venture capital seed money to help facilitate online purchases. According to research company Pitchbook, data shows that investors put $18.5 billion into the payment processing sector in 2018–an increase of five times the previous year.

ETFs to look at in the growing fintech space include the Global X FinTech ETF (FINX) and the  ARK Fintech Innovation ETF (ARKF) . Both ETFs are up year-to-date–FINX is up 22 percent and ARKF is up 5 percent.

ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.

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