Newly public Coinbase (NASDAQ:COIN), the largest regulated cryptocurrency exchange operator, already fits the bill as an innovative, disruptive company. Hence its residence in the ARK Fintech Innovation ETF (NYSEARCA: ARKF).
As innovative companies do, Coinbase is coming up with new ways to, well, innovate, and that could be a plus for ARKF investors. Last week, the crypto exchange giant unveiled a new feature that allows clients to direct deposity their paychecks into a Coinbase account and convert a percentage of their pay to crypto. Try doing that at an ordinary bank.
“Users will choose what percent of their paychecks to deposit with Coinbase and then the currencies into which to convert: the USD or one of the more than 100 cryptocurrencies on its platform,” according to ARK Invest research.
Perhaps in an effort to better compete with traditional banks and lure more direct deposit business, Coinbase won’t charge clients conversion fees, but it will generate revenue from spreads when those clients buy and sell digital assets.
The Coinbase crypto paycheck program is another step in the evolution of digital wallets, a theme that ARKF is highly tethered to, perhaps more so than any other exchange traded fund.
“Digital wallets typically focus on the user payroll opportunity to increase recurring fund flows, user retention, and user engagement with other revenue-generating services. Recently, for example, Square has emphasized that boosting Cash App recurring inflows has been a top priority, and such deposits have been the primary reason its gross profit increased. Similarly, the Chinese government has worked with companies to integrate salary deposits into its Central Bank Digital Currency (CBDC) pilot, hoping to embed the digital yuan in users’ daily lives,” adds ARK Invest.
PayPal’s (NASDAQ:PYPL) Venmo is another example of a marquee competitor in the digital wallet universe. In order, Square (NYSE:SQ), Coinbase, and PayPal combine for about 21% of the actively managed ARKF’s weight.
Regarding Coinbase, it could be onto an avenue for generating long-term revenue with its direct deposit plan, and that could benefit patient ARKF investors.
“ARK believes that, with payroll direct deposit, Coinbase will increase the adoption and monetization of its trading, yield-generating, peer-to-peer, and commerce products. Moreover, by facilitating inflows into crypto, Coinbase is likely to increase user activity across the broader crypto ecosystem as well,” notes ARKF’s issuer.
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