It’s hip to be square, according to the old song. With the ARK Fintech Innovation ETF (ARKF), it’s hip to have large allocation to payments processor Square (NYSE: SQ).
Square could move into direct deposits is the latest sign of fintech companies, including plenty of ARKF components, moving into areas previously dominated by traditional banks. For example, Square is also playing a significant role in processing payroll protection program (PPP) loans. Additionally, the company also procured a banking charter in Utah.
To be sure, those are positives, but Square’s Cash App is likely to provide epic growth for the burgeoning fintech company. Said another way, Cash App’s growth prospects are tantalizing.
“In 2025, Cash App monetizes 20% of its estimated 75 million monthly active users (MAUs), its ‘primary’ MAUs, at the revenue per digital user generated at JP Morgan Chase, Bank of America and Wells Fargo on average in 2019,” notes ARK Invest analyst Max Friedrich.
The Power of Cash App
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
ARKF’s status as the ETF with the largest weight to Square – by far – is increasingly relevant as Cash App grows and provides users with new options and services.
“We believe that Square’s (SQ) Cash App could become a leading global consumer financial services provider,” notes Friedrich. “If Cash App can monetize 20% of its US user base at the level of traditional banks today, then with modest growth in its seller business, SQ could return 19% at an annual rate during the next five years, rising from $150 today to $375 per share in 2025.”
Important to ARKF’s double-digit weight to Square is Cash App’s ongoing evolution, which positions it to capitalize on future growth opportunities.
“Today, Cash App offers users banking services such as direct deposit, debit cards, ATM access, a platform to invest in equities and bitcoin, a rewards program, free transfers from the US to the UK, and integration with Square sellers,” notes Friedrich. “In the future, we anticipate that Cash App will offer a range of services comparable to that of traditional banks today, including personal loans, credit cards, mortgages and insurance. Ultimately, we believe that Cash App will offer a better and more personalized user experience at a much lower cost than traditional banks.”