The ARK Fintech Innovation ETF (ARKF) devotes almost 12% of its own weight to Square (SQ), the biggest weight to the climbing fintech celebrity among ETFs and exposure is becoming more important and rewarding to investors.
ARKF’s Square vulnerability is significant on several levels, not the least of which is, well, clients really the provider. That’s a rarity in regards to financial institutions since most people just don’t enjoy their banks.
“In the US, most customers do not like their banks. In a survey ranking the 100 most popular companies by customer satisfaction, banks took three of the bottom ten places. According to another survey, 71% of Millennials would prefer to visit their dentists than engage with their banks,” writes ARK analyst Max Friedrich.
Upgrades are going digital with quite a few start-ups seeing venture capital seed money to help alleviate online purchases. According to the research firm Pitchbook, statistics proves that investors place $18.5 billion to the payment processing industry in 2018–an increase of five times the previous year.
Other reasons to be bullish on Square include the company’s penetration small business financing in the aftermath of this Coronavirus, but that only scratches the surface of chance with the business and its Money App digital wallet.
“Square’s Cash App, seemingly the fastest-growing consumer financial product in the US, has taken a different tack, offering products for free and building a brand that consumers like,” notes Friedrich. “Among recent marketing initiatives, it sent a limited number of users ‘fun boxes’ with Cash App branded socks and stickers – products typically associated with sports clubs or music groups, not banks.”
Earning ARKF’s Square vulnerability even more persuasive is that Money App and electronic wallets, generally speaking, aren’t being suitably factored into fintech discuss rates. Nor is fresh value as it regards Square.
“While investors are beginning to understand and acknowledge the commercial potential of Cash App, in our view they are underestimating the value of a consumer finance brand that customers trust and want to support,” based on Friedrich.
Fintech enables financial companies to leverage cutting edge technology to decrease expenses, enhance decision making and hazard controls, eliminate middlemen, and improve customer experiences. A thematic strategy includes investments which stand to profit from structural change driven by technological and demographic changes.