Up 73.48% year-to-date, it’s clear the ARK Fintech Innovation ETF (ARKF) isn’t hurting for catalysts. However, investors should remember that fintech opportunities aren’t confined to the U.S. and as an actively managed fund, ARKF is able to reach into other markets for fintech exposure.
ARKF’s status as an active fund not constrained by geographic limitations is increasingly relevant at a time when Europe is becoming a big driver of global fintech growth.
“The surge in the number of mobile phone users and eCommerce’s rise led to the rapid adoption of digital payments worldwide. European countries are no exception, with millions of people choosing cashless payments over cash and credit cards,” according to BuyShares.com. “The European digital payments industry is set to maintain its growth in the following years, with the transaction value jumping over $1trn by 2022.”
Fintech allows financial firms to leverage cutting edge technology to reduce costs, improve decision making and risk controls, remove middlemen, and enhance customer experiences. A thematic approach includes investments that stand to benefit from structural change driven by demographic and technological changes.
Tapping Into Digital Payments Boom
It was just a few years ago that cards, credit and debit, topped cash as payment forms for the first time, indicating there’s plenty of fintech growth ahead. Bolstering the case for ARKF’s international exposure is that digital payments are growing rapidly in ex-US markets and that transition is being sped along by the coronavirus pandemic.
“In 2017, the European digital payments industry reached $507.1bn transaction value, revealed the Statista Global Consumer Survey,” notes BuyShares. “In the next two years, this figure rose to $666.8bn. The increasing trend continued this year, with millions of people choosing webshops instead of brick and mortar stores amid COVID-19 lockdown.”
To some extent, fintech stocks that are able to leverage cashless payments and ARKF itself are benefiting from the notion that cash can transfer the coronavirus from person to person. Medical experts refute that claim, asserting that as long as users of cash are dutiful in washing their hands, cash shouldn’t act as a coronavirus conduit.
Additionally, there’s ample runway for growth in Europe for ARKF domestic holdings, namely Square (SQ).
“Digital commerce represents the largest segment of the market, with more than $545bn transaction value in 2020. However, statistics show the following years are set to witness an impressive growth of the European mobile POS segment, with transactions reaching nearly $407bn value by 2022, a 150% jump in two years,” according to BuyShares.