Syndicated loans can be a big fintech opportunity
The foundation of fintech is disrupting traditional financial services, and what started out as offering consumers easier and more efficient ways to bank and transfer money is rapidly evolving to include advanced financial services.
Yes, it can and does include buying and selling stocks, crypto trading services and even disrupting the long-standing insurance industry, but there is more to the story and it can highlight long-term opportunities with exchange-traded funds such as ARK Fintech Innovation ETF (ARKF).
ARKF is actively managed, which stands out in an ETF segment full of index-based products. There is nothing wrong with funds in the latter camp, but active management can be beneficial when it comes to disruptive technologies, including fintech, because innovative segments and themes evolve at a moment’s notice, and require attention to adequately capitalize on these changes.
Take the case of syndicated loans. It’s a territory long dominated by Wall Street, once seen as complex and often off-limits to ordinary investors. Fintech, however, is breathing new life into this space.
“Back in the 1980s and 1990s, banks used a series of manually driven processes to share information with other lenders when they formed a group to provide financing to companies for investment, expansion or acquisitions. Syndication desks mainly used platforms such as Debtdomain in Europe and Asia, and Intralinks and SyndTrak in the USA, to post information on primary market agreements, conduct bookrunning and issue invitation letters. Jacqueline Poh reported for Bloomberg.
In other words, like so many other areas of old-school financial services, syndicated loans are heavy on record keeping and physical paper. It is a recipe for disruption because this disruption can provide necessary efficiency gains, and potentially increase profitability in the process.
Although ARKF’s current exposure to the fintechization of syndicated loans is not notable, it may change over time as more companies with related exposure go public. Further underscoring the potential benefit of ARKF in the long term is that syndicated loans are just one example of more sophisticated financial concepts where banks may be open to more technology and disruption.
“Bankers complain that technology adoption for loans has been slow compared to other markets such as bonds or stocks because there is no standardization and the markets in Asia, Europe, the Middle East and Africa are fragmented. More platforms may come to target niche segments of the loan market, and some of these could end up being merged into larger entities to bring scale to their business, Bloomberg added.
For more news, information and analysis, visit Disruptive Technology Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon and may not materialize. Information on this website should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any product.
