Lending Becomes Credible Fintech Catalyst
The rise of cashless payments and e-commerce are among the factors driving the ARK Fintech Innovation ETF (NYSEARCA: ARKF) higher this year, but fintech names, including some ARKF components, are increasingly prominent lenders.
Fintech loan growth adds another layer to the ARKF proposition, one that adds to the thesis that fintech companies are willing and able to fill voids created by traditional financial services companies.
“Although traditional banks and credit suppliers still hold the largest market share for consumer and business loans, recent years have witnessed considerable demand for fintech lending,” according to Buy Shares. “With millions of SMEs searching for necessary financial backing to support their businesses amid the COVID-19 pandemic, 2020 witnessed a new rise in the number of these alternative loans.”
Data confirm there's big time lending opportunities for some ARKF holdings.
“According to data presented by Buy Shares, the entire fintech lending industry is expected to grow 9.15% year-over-year to $291.5bn in 2020. The increasing trend is set to continue in 2021, with the transaction value of the unified market jumping by 25% to $335bn value.”
The Rise of Lenders in ARKF
ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
As it is, ARKF components are already encroaching upon territory previously dominated by traditional banks, including smaller business loans, payment processing, and business payroll.
“In 2017, the global fintech lending market was worth $181.2bn, revealed the Statista Digital Market Outlook. By the end of 2019, the transaction value surged to $267.1bn, a 47% jump in two years. Statistics show the global fintech lending industry’s value is expected to increase by $24.3bn by the end of 2020 and hit a total of $291.4bn,” according to Buy Shares.
Some ARKF names are already exhibiting lending prowess, fulfilling billions of dollars worth of Payroll Protection Program (PPP) loans. Earlier this year, the SBA approved several fintechs to provide loans at the end of the program’s first round, including Kabbage, Square (SQ), PayPal Holdings (PYPL), Intuit (INTU), and OnDeck. Square is ARKF's largest holding.
“As the market’s leading segment, business peer-to-peer loans have witnessed a 14% YoY growth in 2020, with the transaction value rising from $180.8bn to $206.12bn. By the end of 2021, the cumulative value of alternative loans to small and medium-sized companies is set to jump over $241.5bn,” notes Buy Shares.
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