Digital currency and cashless payment systems are being traded as the “money of the future”. While cashpoints have probably already had their day, the acceptance of digital payments is increasing markedly thanks to the younger, more technology-minded generations. According to a survey by Expert Market UK, 41% of millennials would prefer making payments to friends using an app than with cash - a development that the financial industry is following with great interest. In recent years many companies have put themselves into a position where they can profit from the “digital wallet” mega-trend. These include credit card bedrocks Mastercard and Visa as well as the technology specialist Fiserv and even Block, the mobile payment provider which only came into being in 2009. Founded by Jack Dorsey, not only is Block active in the classic e-payment sector, but it has also specialised in the “digital assets” segment. The company offers payment services for cryptocurrencies, for instance.
Despite the dynamic growth of the digital payments sector, some industry representatives have not fared so well on the stock market recently. Payment services provider Adyen, for instance, lost a fifth of its value on a one-year view, Block shrank by around a fifth and PayPal actually forfeited more than 60% of its market capitalisation. There are many layers to the reasons for this. For one thing, some of the stocks had previously posted huge gains that invited them to take profits. For another, the risk aversion that is increasingly being seen on the markets had led to money being pulled out of fintechs. Nevertheless, the industry cannot all be lumped together. The share price of the US financial services provider Discover Financial Services grew by 6%, for instance, while Mastercard appreciated 12% and payment services provider Jack Henry & Associates actually climbed more than a third over the last twelve months. A look in the rear-view mirror shows once again how important it is to adopt a diversified approach to a burgeoning market.
Management Fee: 1.10% p.a.
Index Sponsor: Swissquote Bank SA
Issuer: Leonteq Securities AG, Guernsey
Guarantor: PostFinance AG, Bern, Switzerland
Investors have been able to invest in the digital payments sector on a broad basis through a tracker certificate from Leonteq on the Swissquote Digital Payments Index (Valor 43469503) since as long ago as 2019. The actively managed strategy barometer currently contains a total of 19 shares of leading companies around the globe. Many different sectors of business are covered, including payment systems, financial services and providers of electronic payment solutions. The index components must meet quantitative requirements alongside qualitative criteria. Only companies with a market capitalisation of at least USDmn 100 and a daily trading volume of USD 100,000 make it through the selection. The maximum number of members is limited to 25. Accounting for around 73% of the index, the USA currently leads the way in terms of regions.
As already mentioned, investors have been able to take a position in the Swissquote Digital Payments Index since February 2019. Denominated in US dollars, the tracker was issued at a price of USD 100. Leonteq is now adding to this by issuing a Swiss franc tranche. The product launched at a price of CHF 25. The management and administration fees together come to 1.10% p.a. They are joined by a transaction fee of 0.10% for every component adjustment within the index, which is identical to the USD variant. There is a difference in terms of the guarantee: while Leonteq is the issuer, PostFinance is the guarantor. It is certainly a solvent one - its robust capitalisation and cash flow position and its healthy earnings and financial situation mean that PostFinance AG currently enjoys a respectable AA+ rating from ratings agency Standard & Poor’s.
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