Why The FinTech Index Is On The Rise

Investing in FinTech — there’s a new index for that.

Keefe, Bruyette & Woods said last week that it has struck a deal with stock exchange Nasdaq to debut a publicly traded index focused solely on financial services companies.

Known as the KBW Nasdaq Financial Technology Index, with the attendant KFTX ticker, the initial roster will have 49 stocks, noted Fox Business on Friday (July 22). And though this is not the first index focused on the sector, in this case, the gamut of companies spans payments giants, such as Visa, and upstarts, such as Square. All told, said the outlet, the combined market cap of the index itself is around $785 billion, while the firms themselves are defined by KBW as centering on a few key criteria, including revenue streams that are defined and fed by fee income rather than net interest income. And perhaps not surprisingly, these firms operate digitally rather than physically. The index, according to KBW, chose names based in part on correlation.

Fred Cannon, KBW’s research director, told Fox Business that the index came to fruition as there had been, and continues to be, a linkup between traditional finance and smaller-oriented players.

“FinTech has been a developing industry for a number of years, the buzz being around nonpublic companies in FinTech,” he said. “In the last couple of years, we’ve seen a lot of IPOs of FinTech companies and financial specialists that integrate these large companies with FinTech.”

Fox noted that the index itself is estimated to be growing by 16 percent through the next year, as KBW said that financials are on the cusp of further recovery.