Disruptive (and investable) technological themes are permeating an array of previously prosaic industries, including the financial services space. Think about it. It is not surprising to encounter coworkers, friends and family members that do not carry cash and it has been nearly seven decades since the debut of the credit card.
These days, the financial services industry has an increasingly techy feel to it and mobile payments are a big reason why. For consumers and investors alike, the mobile payments theme is broad. It can mean anything from using PayPal Holdings Inc.’s (PYPL) Venmo to send a friend money for picking up that Saturday night Uber fare to swiping your debit card on a Square, Inc. (SQ) platform to pay your hair stylist.
In fact, several of the mobile payments names residing in the Indxx Disruptive Technologies Index (IDTEC) are not classified as financial services companies. Rather, some of these stocks reside in the technology sector. For example, PayPal is a member of the Technology Select Sector Index as is Dow component Visa, Inc. (V).
Thanks to its Apple Pay business, Apple Inc. (AAPL), the largest U.S. company by market capitalization, is a force in the mobile payments business. Recent data indicate 77% of mobile payments transactions involving debit cards are conducted with Apple Pay compared to just 6% for the rival Google Pay.1
Supportive Growth Trajectory
History is littered with examples of technologies that eventually became obsolete. Hardly anyone has a pager anymore and VCRs are essentially extinct. Scores of data points suggest those fates will not befall mobile payments. Rather, mobile payments are increasingly common way of moving money and increasing consumer convenience.
Last year, the mobile payments market was valued at $668.12 billion globally, but that figure is expected to surge to $2.41 trillion by 2023 for a compound annual growth rate (CAGR) of 23.85%2. E-commerce/online shopping, particularly in developing economies, is expected to be a major driver of mobile payments growth around the world.
Many emerging markets lack the brick-and-mortar retail infrastructure that is prominent in the West, meaning some shoppers in these up-and-coming economies spend their discretionary income almost entirely online. It is just one anecdote, but it underscores the massive growth potential of mobile payments on an international scale: China’s Internet penetration is nowhere close to that of the U.S., but the former has far more Internet users than the latter has citizens.
That is not to say the domestic mobile payments should be overlooked or that this investment theme is entirely an international bet. As the chart below indicates, the U.S. mobile payments market is experiencing exponential growth.
Add to that, mobile payments providers are not entirely dependent on e-commerce. Brick-and-mortar stores figure prominently into this investment thesis, too.
“A separate mobile payments study by Juniper Research, for instance, recently projected that 30% of in-store purchases will be made the contactless payment cards and mobile wallets by 2020,” according to Credit Union Times
A Diverse Approach
The ALPS Disruptive Technologies ETF (DTEC), which targets the aforementioned Indxx Disruptive Technologies Index, provides exposure to 10 equally-weighted disruptive technological themes, including mobile payments. DTEC’s 10 mobile payments holdings include Visa, PayPal and Square.
1 Source: Credit Union Times Oct. 8, 2018 https://www.cutimes.com/2018/10/08/77-of-mobile-payments-among-debit-users-are-on-app/?slreturn=20180916194830
2 Source: Mordor Intelligence https://www.mordorintelligence.com/industry-reports/mobile-payment-market
Important Disclosure & Definitions
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus which contain this and other information call 866.759.5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
Standardized performance for the ALPS Disruptive Technologies ETF (DTEC) can be found here. Current holdings for DTEC can be found here.
ALPS Disruptive Technologies ETF Shares are not individually redeemable. Investors buy and sell shares of the ALPS Disruptive Technologies ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
There are risks involved with investing in ETFs including the loss of money. Additional information regarding the risks of this investment is available in the prospectus.
The fund is new and has limited operating history.
Indxx Disruptive Technologies Index (IDTEC): based around companies that enter traditional markets with new digital forms of production and distribution, are likely to disrupt an existing market and value network, displace established market leading firms, products and alliances and increasingly gain market share.
One may not invest directly in an index
ALPS Advisors, Inc. (AAI) has engaged IRIS Werks, LLC (IRIS) to produce analysis and commentary on ALPS-advised ETFs. IRIS currently has a compensated business relationship with AAI. AAI is not affiliated with IRIS.
The content and opinions expressed in this article are that of the author and not the views and opinions of AAI. In addition, AAI assumes no responsibility to ensure the accuracy of the content written by the author.
The author is not an investment professional and this article should not be considered investment advice. While the information and statistical data contained herein are based on sources believed to be reliable, the author takes no responsibility to ensure the accuracy of the content. Additionally, this article should not be relied on or be the basis for an investment decision. Information that is historical is not indicative of future results, and subject to change.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the ALPS Disruptive Technologies ETF
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