Up almost 44% year-to-date, it’s clear the ARK Fintech Innovation ETF (ARKF) is benefiting from some legitimate tailwinds. It’s also becoming clear the fintech space is in its early stages of value creation for investors and some are willing to pay up to access that growth via still private companies.
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. Integral to the long-term ARKF thesis is the ability of fintech companies to forge into new frontiers, something ARKF components are doing.
“Fintech start-up TransferWise is now valued at $5 billion following a secondary share sale, the company announced Wednesday, highlighting increased investor appetite for online payments amid the coronavirus pandemic,” reports Ryan Browne for CNBC.
A Good Time for Fintech
Fintech has been on a rise amid the coronavirus pandemic, which is forcing consumers to utilize digital payment options amid social distancing measures. Additionally, acquisition activity within the space could provide fuel for fintech exchange-traded funds (ETFs).
“Founded in 2011, TransferWise has become a formidable competitor to the likes of Western Union (WU) and MoneyGram (MGI) by lowering fees and adding a slick online platform to help consumers move money across borders. It now has a total of 8 million customers globally and processes £4 billion ($5.2 billion) in cross-border payments each month,” according to CNBC.
TransferWise is still private and it’s not clear when or if it will go public, but ARKF does feature ample ex-US exposure and it’s an actively managed fund, so it can add newly minted stocks if the managers see fit.
More investors are starting to refocus on companies that are in their later stages of the business growth cycle. Per a Peer2Peer Finance News article, the first quarter of 2020 was a tough one for fintech, but “the second quarter saw some major financing rounds for companies like Stripe and Robinhood.”
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.