What's up guys and welcome to wall street millennial, kathy woods, arc innovation etf has returned almost 500 since its inception. In 2014., she was able to make these gains by finding disruptive technology companies and investing in them at early stages. She was one of the first investors to recognize the growth opportunity of tesla. She is constantly monitoring all areas of the economy to find which areas are the most right for disruptive innovation, kathy wood just found a new sector that is ready for explosive growth and could be as big as evs.

This video is made possible by our channel members who get to see these non-time sensitive videos one day in advance and vote on some of our video topics. What's next in the mind of kathy wood? Well, i think uh, you know, we've uh, tesla absolutely is still next, because uh tesla's in other sectors, others business sector - yes, well, we're very excited about digital wallets, uh, so squares, cash, app and and paypal's venmo are leading the way here in china it was wechat Pay and alipay, and we really think that these digital wallets, uh and two-sided marketplaces, merchants and consumers on on both of them uh are are going to usurp a lot of the role the banks play today. It's going digital, going mobile, a little brand bank branch in your pocket or your pocketbook, and we're going to do we're going to have all kinds of financial services available through them, including loans, debit cards, credit cards stock buying bitcoin buying. So we think that's a huge huge trend out there.

She says digital wallets are going to be a massive growth area to disrupt the traditional banking system. The current financial system of credit cards involves significant fees. The bank and payment processors often charge upwards of three percent to the merchant for each transaction. There are also significant hidden fees, such as late fees and overdraft fees.

These fees add up and can end up costing consumers hundreds of dollars per year. The traditional banking system in the us has stayed pretty much the same over the past couple decades. This makes it right for disruptive innovation in china. Most consumers don't even use credit cards.

They instead use mobile payment. Apps such as rechat pay and alipay every merchant in china has a qr code, the consumer scans, the qr code with their phone and pays directly from their wechat account. This offers greater convenience because there is no need for a card. Furthermore, this disintermediates, the banks and credit card companies allowing for a significant reduction in fees to the merchant the merchant passes on part of these savings in the form of lower prices to the consumer.

Digital wallets will experience massive growth in the us over the coming years. There is tremendous opportunity for profits, not just from transaction revenue, but also ancillary revenue streams that can be added to the digital wallet app square's cash app recently added a new feature allowing users to borrow up to 200 on the app the loans are small now, but Once they get the technology right, they have the potential to offer all types of loans from auto loans to home mortgages. Paypal's venmo digital wallet recently announced users will be able to buy cryptocurrencies using bitcoin and ethereum on the apps. As these digital wallet apps do more and more features, consumers will soon be able to satisfy all their financial needs within one app.

This is an opportunity worth hundreds of billions of dollars. This is bad news for the legacy money center banks who are used to enjoying their monopoly over the us consumer banking sector. But it's great news for the fintech companies who will dominate the new world of digital wallets. One of the most important companies in kathy wood's arc etfs, and that is also leveraged to the digital wallet phenomenon - is square.

Kathy wood has very high conviction in the company. As it is the largest holding in your fintech etf, making up more than 10 of the total portfolio square, is one of the most formidable fintech companies in the market today, since the pandemic, first hit square has been one of the first stocks to rebound. It has been so strong that has surpassed its pre-pandemic all-time highs by more than twice over the secret behind square's insane strength is this innovation that allows it to continue to take market share over legacy payments, processors and one of the most powerful drivers of this is None other than digital wallets, you might not know it, but square is behind mobile payment service cash. App cash app is one of the most ubiquitous mobile payment services, both in the us and the uk, and most recently has 36 million active users.

It has an incredibly easy to use. Interface is much more convenient than other ways to spend and transfer money and is already well entrenched. Not only that, but it's growing incredibly quickly and consistently at the current rate, it will soon exceed venmo in terms of usage with digital payments only expected to explode in the future. It's safe to say that square is uniquely positioned to benefit from the trend.

The next stock on the list is one you may not have heard of before, but is actually extremely important to both cathy wood's innovation, etf and the fintech innovation etf. In fact, it is the second largest holding in the fintech innovation etf. Second, only to square the company is called c and is a southeast asian company that has multiple business arms, but their most important unit is called c money, which is basically a cash app venmo type service, except in an economic area that is growing much more rapidly Because of this, they are currently experiencing hyper growth, with total gap revenue more than doubling in the fourth quarter of 2020 compared to the previous year, and the market knows how much growth is ahead of this company having bid up the stock more than two thousand percent In the past two years alone, this company is definitely on the high risk. High reward end of the spectrum, but that's what ark innovation is all about.

With a company like sia, that is a dominant player in digital wallets in an entire region of the world, there is no way to put an upper bound on how much it will grow. The arcf fintech etf bought 174 000 shares of the recently listed coinbase stock and makes up more than one percent of the portfolio. Coinbase is primarily in exchange for cryptocurrencies, but it could also be well positioned to enter into the digital wallet. Space.

Coinbase will soon be launching a debit card that allows users to spend their crypto on goods and services and earn rewards. At the same time. This is a more speculative play and you have to be a long-term believer in cryptocurrency to invest in coinbase stock, but as bitcoin becomes more and more widely accepted in the economy. The potential for a coinbase debit card and eventually digital wallet are immense.

One of arcap's biggest holdings is paypal, which makes up more than four percent of the total portfolio paypal owns venmo, which is the leading peer-to-peer lending app in the us today. Venmo also lets you comment on your friends payments. This makes it a social media play as well as a digital wallet play. They are also continuously innovating.

They recently started supporting bitcoin transactions on the app. Finally, we have one of the only stocks that ranks in the top 10 in both the arc: innovation, etf and the fintech innovation, etf, and that is shopify. Shopify ranks number eight on the innovation, etf and number five on the fintech innovation. Etf shopify has had one of the most incredible runs in the past five years out of any of the tech names that is in large part, due to the almost limitless potential for growth, which they still have ahead of them.

What shopify does is it offers tools for small businesses to set up professional websites for their stores and handles payments and other things that traditionally make it difficult for small businesses to go online. One of the biggest areas of strength for them is those digital payments. Without shopify, small businesses would have to set up their store's interface with credit card companies. Banks or other financial services square could help them do that, but it's inherently a complicated procedure with a lot of costs involved.

One of shopify's major strengths is the solution to this problem, but with digital wallets shopify still has a lot of room for expanding their product, offering that's why kathy wood put them in her innovators list, because she expects that they will continue to innovate and grow their Business that way as long as they keep innovating their limit may as well be infinite. But what do you guys think about these stocks? Let us know in the comment section below also check out our second channel wsm research, where we post in-depth dd on high growth tech stocks. As always. Thank you.

So much for watching wall street millennial signing out.