I have to say, I’m not surprised to see a high-octane fintech startup become a huge “unicorn.”
By “unicorn” I mean a privately held firm with a pre-IPO valuation in excess of $1 billion.
Then again, Stripe Inc. is really onto something. The firm’s technology serves as a great digital payments gateway. Wall Street and Silicon Valley are clearly impressed.
Stripe recently received fresh funding of roughly $250 million from the venture capital firms Sequoia Capital, General Catalyst, and Andreessen Horowitz.
After that cash haul, Stripe is now valued at $35 billion, making it one of the world’s most valuable startups.
It’s easy to see why Stripe is so well positioned to succeed. Adapt Insights says the global fintech payments market is already worth $4.8 trillion.
Don’t worry. To cash in on this highly lucrative field, you don’t have to strike a private deal or wait for a company like Stripe to go public.
How Fintech is Shaking up the Market
If you’ve followed along with me for any length of time, you know how much I believe in the profit potential behind fintech.
Simply stated, it’s disrupting just about every type of payment system in the world today.
We’re talking everything from how small merchants accept credit cards, to how Wall Street settles transactions, to online sellers, to cash apps and every system in between.
For my part, I’ve been saying the field will be worth about $7 trillion within a decade. Turns out, that forecastwas too conservative.
As I noted a moment ago, Adapt Insights pegs the market at $4.8 trillion by the end of the year. Here’s what jumped out at me: the firm says that figure will nearly double to $10.1 trillion by 2024.
And Stripe is right in the thick of it all…
The firm has some great tech. Keeping it simple here, Stripe’s platform does two main things:
- It allows Web companies and online marketplaces to accept credit cards for their goods and services.
- It enables clients to pay out money to the people and firms that sell on their platforms.
Talk about scale…Each year, Stripe processes hundreds of billions of dollars in payments for millions of users. That includes websites and apps like Airbnb as well as tech firms like Twilio Inc. (TWLO).
Here’s the thing, I have no doubt Stripe will knock it out of the park after it goes public.
But that presents us with a real challenge. We don’t know when it may issue stock and start trading publicly.
The Index Fund That Will Prepare You for the Next Big Fintech Breakout
Fortunately, in a case like this, we have a way to invest in the entire global fintech market. It’s an investment vehicle that has a history of finding breakout leaders.
That’s where the Global X FinTech ETF (FINX) comes in. This fund was launched in September 2016 to own the leading and emerging firms in this highly disruptive area of finance.
As a passive fund, it tracks the Indxx Global Fintech Thematic Index. Stocks in the index must have a market cap of at least $100 million, which means it includes many smaller up-and-coming firms as well as established leaders.
With roughly 35 stocks in its portfolio, FINX offers savvy but price-conscious tech investors a nice entry point. It was recently trading just below the $29 to $30 range.
It owns firms at the leading edge of the fintech revolution and also gives us some global exposure. Take a look:
- Fiserve Inc. (FISV) takes a very broad approach to the overall world of payments and digital transactions. It serves more than 12,000 banks, credit unions, retailers and other clients around the world. The firm’s mobile solutions cover everything from simple banking inquiries to a complete set of mobile alerts and payment models as well as allowing consumers to send and receive money from their mobile devices.
- This fund also makes room for fintech upstarts such as Square Inc. (SQ), which has boosted per-share earnings by an average 62% over the past three years. Square has become a leading ally of small and mid-sized businesses with its full-fledged mobile commerce platform that can process and track all of the sales, marketing, inventory and accounting tasks a firm must fulfill.
- Brazil’s Pagseguro Digital Ltd. (PAGS) is bringing the mobile payments revolution to Latin America’s largest economy. It was founded in 2006 as an online payment platform to provide digital payments infrastructure. The firm offers affordable, mobile-first solutions for merchants to accept payments and manage their cash through their digital systems without the need for a bank account.
- Germany’s Wirecard Ag (WRCDF) has also proven to be a key disruptor of mobile payment systems. The firm has secured a banking license, enabling it to issue virtual credit cards that are now a payment option offered by 29,000 firms, mostly in Europe. WireCard, thanks to a purchase of Citigroup Inc. (C)‘s Prepaid Card Services, has begun to build a growing presence in the U.S. as well.
Now then, FINX recently got caught up in the market’s choppy trade over fears of slowing growth and rising trade tensions, but it’s finding a new base in advance of what looks to be a new rally.
From the time the market rebounded last Dec. 24 until FINX hit a high of $31.29 on July 26, this winning ETF was up just shy of 51%. It beat the bellwether S&P 500 in the period by 77%.
On a year-to-date basis, it has done nearly as well, beating the broad market by 71%.
I believe that trend will hold for the foreseeable future.
After all, FINX is made up of the high-growth payments sector’s best performers.
Since digital payments will remain an unstoppable force for years to come, you can count on this powerful ETF to improve your net worth over the long haul.
Cheers and good investing,
Michael A. Robinson