Financial technology is changing.
The growth of mobile payments and e-commerce form only part of the development of financial technology, or fintech, and its impact on the global banking system. From cryptocurrencies to artificial intelligence tools that help investment firms with risk management to crowdfunding, where a group of regular people put their cash together to invest in something big, things are changing for finance in the 21st century. If you're looking to invest in these trends, picking individual stocks can require a lot of research -- and in many cases, a lot of risk. Another option: exchange-traded funds that offer an easy and diversified way to invest in the fintech revolution. Here are seven to consider.
Global X FinTech ETF (ticker: FINX)
This Global X fintech ETF is the oldest and most established on the list. With more than $400 million in assets and more than three years of track record on public markets, FINX is a legitimate ETF with clear interest behind it -- even if the list of holdings totals just 33 total positions as of this writing. The tactics of this fund involve putting money behind companies "helping to transform established industries like insurance, investing, fundraising, and third-party lending," according to Global X. That means a mix of names you may have heard of like mobile payments giant Paypal Holdings (PYPL) and others you may not have, like mortgage lending analytics firm Black Knight (BKI).
ARK Fintech Innovation ETF (ARKF)
The ARK family of ETFs may not be as well-known as some of the others in the market, but these unique offerings are focused on disruptive areas of technology and growth, from biotech stocks to self-driving vehicles. ARKF is the fintech offering, launched in early 2019 and offering exposure to firms in mobile payments as well as digital wallets and blockchain technology. Its No. 1 position right now is payments fintech Square (SQ) as well as a smattering of digital retail plays, including South American e-commerce giant Mercadolibre (MELI).
ETFMG Prime Mobile Payments ETF (IPAY)
Mobile payments are a big part of the potential many see in fintech. Just as a digital age has allowed us to easily access information on the go, smartphones also allow us to transact anywhere on the planet -- without cash, and often with greater security than with a physical credit card. The ETFMG Prime Mobile Payments ETF is a pure play on this corner of fintech, featuring Paypal and Square along with big dogs like Visa (V) and smaller players like PaySign (PAYS) that are seeking a piece of the mobile payments pie. The fund isn't as broad as others on the list, but with $660 million in assets represents one of the larger dedicated fintech funds.
Tortoise Digital Payments Infrastructure Fund (TPAY)
A smaller and more recent entrant, TPAY is also a twist on digital payments -- but one that focuses on the infrastructure required for 21st century transactions rather than trying to pick stocks that process the most in volume. Think top holding Fiserv (FISV), which offers risk management and compliance services as well as technology services to banks. Also, DocuSign (DOCU), which provides security and verification services. Rather than build up an installed user base with a payment app or demand billions in linked accounts, these companies count the banks themselves as clients -- not consumers -- and add an interesting twist to the digital payments trend.
Amplify CrowdBureau Peer-to-Peer Lending & Crowdfunding ETF (LEND)
This Amplify ETF, which began trading in May, is unique in that it emphasizes crowdfunding, a fast-growing area of fintech that allows small investors to pool together funds to back projects, invest in companies or even back a big real estate project. The short list of about 35 components include $5 billion financial portal LendingTree (TREE) as well as under-the-radar picks such as Chinese consumer credit company Qudian (QD). There are some riskier plays here, since crowdfunding is relatively new. However, this ETF gives a great way to play this exciting corner of fintech without picking an individual company versus the field.
Innovation Shares NextGen Protocol ETF (KOIN)
If the name of this fund has you wondering what it has to do with fintech, the ticker offers a clue. This fund focuses on blockchain technology that powers cryptocurrencies including bitcoin, ether and others. Though cryptocurrencies can be volatile, the technology behind them has many investors salivating. Blockchain is theoretically a way to track and digitize assets of any form in a secure and decentralized way. The largest of KOIN's holdings are tangential plays like chipmaker Nvidia Corp. (NVDA) that is well-known for creating the hardware used by cryprocurrency miners. KOIN is in position to give investors an easy way to play the growth in cryptocurrencies -- without the volatility of owning actual bitcoin.
iShares U.S. Financial Services ETF (IYG)
There are huge fintech incubators within some of the biggest financial firms including Goldman Sachs Group (GS), as well as at financial services companies like American Express Co. (AXP). IYG offers an easy way to invest on the internal efforts at these big players. Not only are these efforts well-funded, but they also can easily be supplemented by big-ticket acquisitions that strengthen the dominance of these leading financial players. In many ways, this U.S. financial services ETF is the safest bet on fintech's evolution.
Fintech ETFs to buy now:
-- Global X FinTech ETF (FINX)
-- ARK Fintech Innovation ETF (ARKF)
-- ETFMG Prime Mobile Payments ETF (IPAY)
-- Tortoise Digital Payments Infrastructure Fund (TPAY)
-- Amplify CrowdBureau Peer-to-Peer Lending & Crowdfunding ETF (LEND)
-- Innovation Shares NextGen Protocol ETF (KOIN)
-- iShares U.S. Financial Services ETF (IYG)
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