Global X Fintech & Blockchain ETF (CBOE: FTEC)

The FTEC exchange-traded fund provides targeted exposure to the Indxx Developed Markets Fintech & DeFi Index, capturing the rapid evolution of global financial services. By tracking leading innovators across decentralised finance, digital payments, and automated tax software, the fund offers a strategic gateway into the digitisation of capital markets.

As traditional banking faces ongoing disruption from peer-to-peer lending and blockchain integration, FTEC identifies the top seventy-five companies driving these efficiencies.

This investment opportunity serves as a crucial hedge against legacy financial sector risks while complementing broader technology holdings. With the global economy transitioning toward cashless systems and tokenised assets, FTEC focuses on high-liquidity entities that derive primary revenue from the structural shift in how the world moves, manages, and analyses money. It represents a sophisticated approach to capturing the long-term growth of the emerging financial technology landscape within developed economies.

FTEC tracks the performance of the Indxx Developed Markets Fintech & DeFi Index. The index includes companies from developed markets with significant exposure to one of several fintech sub-themes: decentralised finance, digital payments, financial data provider and analyser, financial enterprise solutions, peer-to-peer lending and crowdfunding, personal finance software, tax compliance software, trading and capital markets, and point-of-sale. 

FTEC seeks to invest in companies on the leading edge of the emerging financial technology sector, which encompasses a range of innovations helping to transform established industries like insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions.

Financial services have the strongest expected uptake of blockchain of any industry, a survey from PwC found.

Regulations on the banks introduced after 2008 financial crisis has created a boom in fintech credit companies, including Afterpay. 

Fintechs are companies that bring technology to financial services - banking, wealth management, insurance, etc - making it cheaper and more efficient. Free share trading, instant international money transfers, robo-advice and digital wallets are recent examples of fintech disruption. With blockchain adoption looming, and the world steadily turning cashless - there is much to come. 

The Fintech Industry

• Decentralised Finance: blockchain technology most famously behind cryptocurrencies. Its other usesin finance potentially include tokenisation and smart contracts.
• Digitalised Payments and Point of Sale: are companies bringing technology to make payments quicker and more seamless. It includes smartphone apps, but also card networks and point of sale machines.
• Financial Data Provider and Analyser: financial data companies allow assets - like shares, real estate, bonds - to be accurately priced and their performance to be measured.
• Finance and Tax Software: software companies are driving automation throughout finance and removing human error from tasks.
• Trading and Capital Markets: is allowing wealth management like brokerage and financial advice to run over the internet.

• FTEC tracks the Indxx Developed Markets Fintech & DeFi Index. The index identifies companies in developed markets with market capitalisations greater than US$500mn and a 6-month average daily turnover greater than or equal to US$2mn.
• The index provider has identified several “sub-themes” they include - decentralised finance, digital payments, financial data provider and analyser, financial enterprise solutions, peer-to-peer lending and crowdfunding, personal finance software, tax compliance software and backend payment processing, trading and capital markets, point of sale (POS). 
• Company’s revenue for each sub-theme is identified, using proprietary and public data. After this, a company is assigned to the sub-theme it derives the highest revenue from. Companies within the relevant sub-themes will be eligible for inclusion.
• The top 75 companies based on market capitalisation will be chosen, with companies from each sub-theme capped at 10, with the exception of decentralised finance which is capped at 20. Consultants are equally weighted at each rebalance.

• To express long-term strategic or short-term tactical views on blockchain and fintech companies.
• Hedge against disruption to the banks, whose shares often feature in superannuation funds.
• To complement technology sector exposure with finance-aligned companies outside of the GICS classification (the industry sector classification created by MSCI and S&P Dow Jones Indices).

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Information current as at 31 January 2024.