Fintech itself is a disruptive technology accessible by exchange traded funds, including the ARK Fintech Innovation ETF (ARKF ).
Like other disruptive technologies, fintech intersects with other innovative segments, including artificial intelligence/automation and blockchain. While disruptive growth stocks, including fintech names, are out of favor today, it pays to remember that this style of investing could eventually rebound, and it’s pioneered in part by ARK Investment Management.
That’s a longer-ranging positive because the applications for other disruptive technologies in the fintech world are immense, including the boosting of efficiencies.
“Automation is not a new concept to AI, but combining AI and blockchain can allow for synergies in both scale and efficiency. Blockchain technology can remove unnecessary third parties from multiparty transactions, ultimately accelerating the speed of transactions and increasing efficiencies across transactions. Reducing the friction between these transactions empowers individuals to own their data and blockchain ensures the security of the transaction process,” notes Sharon Yang of FactSet Research.
Increasing use of automation by fintech purveyors could highlight long-term opportunities with the ARK Autonomous Technology & Robotics ETF (ARKQ ).
Enhancing the related investment case is that, on the surface, AI and automation don’t appear to have much in common with blockchain, but upon closer examination, there are relevant intersections. Those could result in new investment implications for assets including ARKF and ARKQ.
“Blockchain’s immutable digital records may be a way to offer insights into AI’s framework and model to address the challenge of transparency and data integrity,” adds Yang. “Using blockchain can also enhance data security and integrity by storing and distributing AI with a built-in audit trail in the blockchain. Having this audit trail ensures that the data being used to train models along with the models themselves keep their integrity.”
Something else to consider is that fintech is a relatively new industry, and just as the internet went to web 2.0 and now web 3.0, market observers should await the arrival of fintech 2.0. That could speed along the applications of AI/automation and blockchain in the fintech arena. As that happens, more investors could enter the market, further increasing the need for fintech companies to embrace automation and blockchain.
“The more investors there are, the more data there will be that would be impossible to process without AI. Blockchain provides the foundation for smart contracts to improve transparency and data management, while AI may be leveraged to scale processes, accelerate transactions, and extract insights from large volumes of data,” concludes Yang.
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