Topic: ETFs

Profit from the fintech revolution

The growing use of technology in financial services has produced a high-growth industry—fintech. The companies involved provide a wide range of services, including digital payment systems, data analytics, process automation and investment management.

Here are two ETFs that aim to benefit from fintech. (See the supplement on page 119 for more information.)

GLOBAL X FINTECH ETF $24.13 (Nasdaq symbol FINX; TSINetwork ETF Rating: Aggressive; Market cap: $332 million) invests in firms that provide innovative technologies meant to transform the way insurers, banks and other financial services firms conduct their business.

The fund tracks the Indxx Global FinTech Thematic Index. That index tracks stocks from developed markets that are involved in at least one of six fintech themes. These are digital payments, peer-to-peer lending, enterprise solutions, alternative currencies, automated wealth management, and crowdfunding.

  • Fintech has the power to disrupt traditional financial services—just like, say, Uber or AirBnB
  • Digital payments and e-commerce continue to expand rapidly. But they still have lots of growth ahead
  • Competition is fierce in this fast-changing area, so ETFs can help cut risk

The majority of the ETF’s assets are in the U.S. (68%), with 17% in Europe, and 8% in Australasia. Top segments are Technology (64%), Financials (19%) and Industrials (17%).

The fund currently holds 37 stocks, with the top 10 making up 57% of total assets. Top holdings include Wirecard AG (Germany: payments, 6.8%), Square Inc. (U.S.: payments, 6.4%), Fiserv (U.S.: financial services technology, 6.0%), and PayPal (U.S.: payment services, 5.8%).

This ETF launched in September 2016 and charges a high 0.68% MER. The Global X Fintech ETF offers reasonable liquidity, with an average $2.3 million in units trading daily.

The fund’s dividend amounted to $0.0246 a unit in 2017, for a yield of 0.1%. The p/e ratio is a high 31.6.

The ETF has returned 12.6% over the last year, while the broad-based MSCI World Equity Index gained 0.5%. Since the startup of the fund, it has had a total return of 60.6%. That’s well ahead of the 21.1% gain for the global market index.

ETFMG PRIME MOBILE PAYMENTS ETF $38.17 (New York symbol IPAY; TSINetwork ETF Rating: Aggressive; Market cap: $477.4 million) invests in companies that provide either payment processing services, payment systems infrastructure or credit card networks.

The fund tracks the Prime Mobile Payments Index, which is comprised of firms that derive most of their revenue from the mobile payments industry. Portfolio weights are based on the market capitalization of the selected stocks, although individual holdings are capped at 6% of the total.

The bulk of the ETF’s assets (75%) are held in the U.S., followed by Europe (8%), Australasia (8%), Latin America (7%), and Japan (7%). The main industry allocations are Financials (41%), Industrials (36%) and Technology (23%).

The fund holds 38 stocks, with 50% of its assets allocated to its top 10 stocks. Those include American Express (6.1%), Visa (6.0%), PayPal (5.9%) and Mastercard (5.8%).

The ETF started up in July 2015, and its MER is a high 0.80%. An average of $6.7 million in units change hands daily. That provides reasonable liquidity.

In the past 12 months, the fund paid a dividend totalling just $0.00854 a unit for a yield of 0.02%. Its p/e ratio is 21.0.

The units gained 13.4% over the last 12 months, compared to a gain of 0.5% for the broad-based MSCI World Equity Index. Since its 2015 startup, the ETF is up by 50.8%. That’s well ahead of the 21.8% gain for the global market index.

Both the FINX ETF and the IPAY ETF are reasonable choices for investors who want exposure to the fast-developing financial technology industry. FINX provides broader exposure, where IPAY is focused on payments.


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