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Jul 28, 2016

Fintech Buds into its First Index

KFTX takes over as the first major index devoted to publicly traded fintech companies

Written by Slice Capital’s Aren Raisinghani.

The last few days have been revolutionary for fintech: on July 18, 2016, Keefe, Bruyette & Woods and Nasdaq revealed the KBW Nasdaq Financial Technology Index (KFTX), the first major index devoted to publicly traded financial technology companies in the United States. The index tracks 49 companies, composing 18% of all financial companies in the United States, and represents $785 billion in market value. The index includes companies that mainly sell financial services, aren’t brick-and-mortar oriented, and generate most of their income from fees instead of loans or deposits (Wall Street Journal, 07/19/2016).

Keefe, Bruyette & Woods and Nasdaq revealed the KBW Nasdaq Financial Technology Index (KFTX), the first major index devoted to publicly traded financial technology companies in the United States

The establishment of a stock index dedicated exclusively to fintech is indicative of its increased influence on the global economy. In the past few years, global adoption — defined as the number of users as a percentage of the digitally active population — of fintech has soared: its current adoption rate is approximately 15.5%. The top three cities for fintech are New York, Hong Kong, and London, according to Ernst & Young (Forbes, 07/20/2016). Asia currently has the global lead in financing fintech start-ups, with the United States and Europe trailing, respectively (Forbes, 07/20/2016). While North America hosted the largest number of deals in quarter one of 2016, Asian fintech companies raised $2.6 billion — making them worth an average of five times as much as their United States-based counterparts (Bloomberg, 05/25/2016). Deal volume has steadily increased at 11.4% every year, and fintech companies are becoming VC-funded at 33% annual growth (Forbes, 07/20/2016).

Fintech companies have spearheaded advancements in the financial sector, with both fledgling and established companies tapping into crowdfunding, robo-trading, cross-border transactions, P2P lending, bitcoin, and mobile payments. As a result, they successfully target millennials and are able to respond to millennials’ evolving demands (Bloomberg, 05/25/2016).

With the explosive growth and advancement in the field, funding for venture capital-backed fintech startups is predicted to reach new heights in 2016. At Slice Capital, we’re excited and humbled to further such a budding, promising sector.