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This article examines the four best fintech ETFs on the market, in addition to exploring their respective holdings, advantages, risks, and alternatives.
Best Fintech ETFs: An Overview
Fintech exchange-traded funds provide narrow exposure to the growing financial technology sector.
These thematic ETFsseek to capture gains in companies creating new technology to improve or disrupt traditional financial products and services.
Given these ambitious goals, fintech ETFs typically have a bias towards growth stocks with lofty valuations.
Best Fintech ETFs
#1. ARK FinTech Innovation ETF (ARKF)
- Performance over 1-Year: -68%
- Expense Ratio: 0.75%
- Assets Under Management: $848 million
The ARK FinTech Innovation ETF provides exposure to fintech innovations, including mobile payments, digital wallets, peer-to-peer lending, blockchain technology, and risk transformation.
ARK is bullish on the increased adoption of digital wallets, which it defines as “smartphone-enabled financial ecosystems that provide access to a variety of services including wealth management, insurance, instant payments, and crypto-assets.”
The growth of digital wallets is primarily driven by two companies and their respective apps: Block’s (formerly Square) Cash App and PayPal’s Venmo.
ARK expects more than 220 million digital wallet users in the U.S. by 2024, equating to an equity market opportunity of $800 billion.
Shopify (SHOP) is another top holding in ARKF. This challenger is taking on Amazon (AMZN) in the e-commerce space, but its growing payments business is welcoming competition from the best fintechs, too.
Shopify’s Shop Pay is an accelerated checkout that lets customers save their information to complete faster transactions.
Shop Pay is 70% faster than a typical checkout and has a 1.72x higher conversion rate. Its order tracking, management, and carbon-neutral delivery also improve the consumer experience.
Shopify recently made Shop Pay available for non-Shopify merchants, extending the service to all merchants selling on Meta (FB) and Google (GOOG).
The last company we’ll mention is Coinbase (COIN), the leading cryptocurrency exchange that has +70 million users.
The company collects a fee each time these assets are bought, sold, or moved, a business line that makes Coinbase one of the best crypto stocks on the market.
In summary, buyers of ARKF are getting fintech exposure from a variety of angles.
ARKF Top Holdings:
- Shopify (SHOP) 9.66%
- Block (SQ) 9.60%
- Twilio (TWLO) 7.87%
- UiPath (PATH) 7.61%
- Coinbase (COIN) 7.23%
#2. Global X FinTech ETF (FINX)
- Performance over 1-Year: -52%
- Expense Ratio: 0.68%
- Assets Under Management: $590 million
The Global X FinTech ETF (FINX) enables investors to “access high growth potential through companies that are applying technological innovations to disrupt and improve the delivery of financial services.”
The 54 holdings in FINX are more closely tied to the financial sector than the companies in ARKF. You won’t find Shopify, Snapchat, or Amazon in this fund.
The geographic breakdown is another differentiator between ARKF and FIN. Each has high allocations to North America — 60% and 55% respectively — but they diverge from there.
ARKF shells out 28% to the Asia Pacific while FINX allocates just 4% to this region.
One of FINX’s top holding is Adyen, a Dutch payment company that allows businesses to accept e-commerce, mobile, and point-of-sale payments.
FINX Top Holdings:
- Block (SQ) 6.40%
- Adyen (ADYEN) 6.36%
- Fiserv (FISV) 6.18%
- Fidelity National Information Services (FIS) 6.09%
- Intuit Inc. (INTU) 6.04%
#3. ETFMG Prime Mobile Payments ETF (IPAY)
- Performance over 1-Year: -42%
- Expense Ratio: 0.75%
- Assets Under Management: $600 million
The ETFMG Prime Mobile Payments ETF (IPAY) launched in 2015 as the first exchange-traded fund to target the mobile payments industry.
The fund benefits from the increasing use of smartphones, e-commerce, and the need for hassle-free transacting.
ETFMG created the fund to capitalize on the shift from credit card and cash transactions to digital and electronic systems.
Visa (V) and MasterCard (MA) are primary holdings in IPAY. These were fintech companies before the term even existed.
If an electric transaction occurs anywhere on this planet, there’s a decent chance Visa or MasterCard made it happen.
And they’re embracing the wave of fintech coming to market. Whether it be partnerships or acquisitions, Visa and MasterCard will benefit from more financial technology.
IPAY Top Holdings:
- ETFMG Sit Ultra Short ETF (VALT) 7.17%
- Visa (V) 6.50%
- Mastercard (MA) 6.06%
- American Express (AMEX) 5.63%
- PayPal (PYPL) 5.54%
#4. Invesco QQQ Trust ETF (QQQ)
- Performance over 1-Year: -18%
- Expense Ratio: 0.20%
- Assets Under Management: $157 billion
The Invesco QQQ Trust ETF (QQQ) invests in the tech-heavy Nasdaq-100 Index. So why is QQQ one of the best fintech ETFs?
The FAAMG stocks — Meta, Apple, Amazon, Microsoft, and Google — make up 43% of QQQ, and they’re each flirting with financial products.
To varying degrees, they are platforms that drive or facilitate commerce in some way.
Whether it be streaming, cloud computing, or advertising, the best FAAMG stocks are responsible for billions in value transfers each day.
We believe regulatory fears are the only thing preventing them from aggressively entering the fintech space.
Apple Pay is Big Tech’s most prominent offering with over 500+ million users worldwide.
Then there’s Meta’s Novi project, a blockchain-based payment system that will use stablecoins to transfer value between the company’s 3+ billion users. This is Meta’s third stablecoin-related project — the previous being libra and diem.
We expect the rest of Big Tech to go the way of stablecoins and tokenize value transfers on their respective platforms.
Stablecoins will provide access to the US dollar and offer payment rails to developing nations that don’t have an established or trusted banking infrastructure.
Regardless, there are many fintech companies in QQQ, such as PayPal, Fiserv, Intuit, and DocuSign.
QQQ Top Holdings:
- Apple (AAPL) 13.32%
- Microsoft (MSFT) 10.53%
- Alphabet (GOOG, GOOGL) 7.55%
- Amazon.com (AMZN) 6.24%
- Tesla (TSLA) 4.10%
QQQ provides exposure to all types of technology, including fintech.
Alternatives to the Best Fintech ETFs
One alternative to owning fintech ETFs is to buy individual fintech stocks.
You can leverage the research done by these ETF providers, see where they agree and disagree, and then synthesize your own investment strategy and invest in individual names.
Another option is to buy bitcoin, a hard monetary good with plenty of asymmetry from a risk-to-reward perspective.
In our estimation, the best performing fintech stocks will be the ones that embrace the Bitcoin network.
The final alternative we’ll mention is patience. You can wait until Stripe goes public at a $200 billion valuation.
Best Fintech ETFs: The Risks
In March 2021, Block began operations of Square Financial Services after completing the charter approval process with the FDIC and the Utah Department of Financial Institutions.
Block is officially a bank. CFO Amrita Ahuja said, “Bringing banking capability in-house enables us to operate more nimbly, which will serve [Block] and our customers as we continue the work to create financial tools that serve the understood.”
It’s incredibly pessimistic to read that headline and get bearish on SQ, but ‘nimbly’ and banking regulations aren’t typically used in the same sentence.
Block is trying to disrupt the legacy banking institutions embedded into this country’s fabric and plenty of others.
They have the lobbying influence to make things difficult for Block and other challengers in the future.
This section has exclusively discussed Square’s role in the ecosystem, but other fintech companies will face similar problems as they grow and become more viable competitors to Goldman Sachs and Morgan Stanley.
Best Fintech ETFs: FAQs
What is the best Fintech ETF?
Here are the best Fintech ETFs:
- ARK FinTech Innovation ETF (ARKF)
- Global X FinTech ETF (FINX)
- ETFMG Prime Mobile Payments ETF (IPAY)
- Invesco QQQ Trust ETF (QQQ)
Is there a Fintech ETF?
Yes, there are four fintech ETFs on the market: ARKF, FINX, IPAY, and TPAY. Each has similar holdings but differs in expense ratio and weightings.
What is the best Fintech stock?
The best fintech stocksare Block (SQ), PayPal (PYPL), Visa (V), and MasterCard (MA). Depending on your definition of ‘best,’ consider stocks like Coinbase (COIN), Robinhood (HOOD), MercadoLibre (MELI), Affirm (AFRM), SoFi (IPOE), and Zillow (Z) for more types of fintech exposure.
Is PayPal a Fintech?
PayPal (PYPL) is a fintech by every definition of the word. It was founded in 1998 by the ‘PayPal Mafia,’ a group of builders that went on to found companies like Tesla (TSLA), SpaceX, Starlink, Palantir (PLTR), YouTube, and LinkedIn.
Bottom Line: Best Fintech ETFs
We’ve now explored the top four ways to get access to the fintech sector.
Your investing goals and risk tolerance will ultimately determine which of these you choose to invest in, if any.
This article is for informational purposes only. It is not intended to be investment advice. To learn about how we selected the Best FinTech ETFs, read our editorial guidelines and research methodology for public equities.
This article was updated on May 5th, 2022 to remove The Ecofin Digital Payments Infrastructure Fund (TPAY) from our list.
This article was updated on July 17th, 2022 to reflect the changes in performance and characteristics of each fund.
