The Thematic Payments Innovation Index (TPAIN)

TL;DR

• We created the Thematic Payments Innovation Index (TPAIN) to track the performance of the most innovative payments companies all over the world.
• Several of the founding team members of Thematic are payments nerds (aka experienced payments product developers), having built the global payment and commerce systems at Airbnb, PayPal, Eventbrite, Brex, and Plaid.
• We believe that in payments, useful innovation wins. Unlike other payment and fintech indices, TPAIN intentionally tracks companies that are focused on payments and driving growth through product innovation.
• Follow the index and join the conversation! Thematic | Twitter.

Introducing the Thematic Payments Innovation Index

The Thematic founding team has a background in the payments industry, having built payment and commerce systems for Airbnb, PayPal, Eventbrite, Brex, and Plaid. During our time at Airbnb, we had to solve for payment use cases that were largely unheard of at the time. No payment solution was “one size fits all,” and no one company had the reach and capabilities that we needed. The best payment companies focused on solving consumer problems instead of forcing behaviors. They tried different approaches, moved quickly, and most importantly, built trust. The best and most successful companies were the most innovative.

Now that we’re at Thematic building indices and ETFs, we’re drawing on that experience to develop the first financial index focused on the best-in-class companies that are driving growth through innovation. The companies selected to our index have a multi-year track record of innovating in the payments industry at least one of the following ways:

• Increasing the breadth of online and/or offline commerce while lowering transaction friction
• Creating new products and services to capture new markets
• Improving existing use cases through the development of disruptive technologies
• Increasing financial access and economic opportunity

A few examples:

Payoneer Global Inc. (NASDAQ: PAYO) was a valued partner of ours at Airbnb. By creating a network of local banks, they enable customers like Airbnb to remit money in local currency and through the recipient’s most trusted financial institution, their bank. By using local rails, Payoneer created more financial access and opportunity by allowing the recipient to keep more of their funds.

Grab Holdings (NASDAQ: GRAB) started as a rideshare and delivery app for southeast Asia. In a region dominated by cash-based economies, Grab became a superapp by expanding to payments, insurance, and investing by capitalizing on the growth of mobile technology.

DLocal (NASDAQ: DLO) created a payment gateway focused on emerging markets, starting with LatAm. By creating a modern API spanning dozens of local payment providers, DLocal made it possible for merchants to do business in hard-to-reach markets.

How we created the index

Once we identified the index theme of innovation in the payments industry, we developed the criteria for inclusion in the index. We defined what it means to be innovative, and in what ways - innovations had to significantly move the needle for consumers or businesses. Innovations could take many forms - solving for or improving on existing use cases, expansion into regions, or technological advancements that improve speed, operations, or reduce costs. We also added criteria on growth, as an indicator that innovations were creating value.

The first 23 companies currently in the index were selected based on their track record of building, launching and scaling innovative products in their respective markets. For a detailed breakdown of the index selection criteria, please take a look at the index methodology.

There were some notable companies omitted from the index. First, we intentionally chose companies that focus primarily on payments - for example, Apple, Amazon, and Walmart have produced innovative payment products, but as adjacencies to their core businesses. We also intentionally omitted the large incumbents such as Visa, Mastercard, American Express, and large banks, choosing to shine a brighter light on the upstarts that are shaping the industry.

The index was built using the Thematic Index Builder. After the theme was identified, we added search criteria, ran backtests, and published the index. All in all, the actual index building only took about 10 minutes with Thematic. 

What’s next for TPAIN?

With TPAIN, we will track the collective performance of the most innovative companies in the payments industry. We believe that the thematic focus differentiates this index from other more general fintech indices (such as F-prime, AKRF, FINX, and IYG), which will be reflected in its performance.

We will also use this index as a way to track and spotlight companies that will likely join the index once eligible. With the level of investment in fintech startups over the last decade, we expect that companies such as Stripe, Brex, Ramp, and Modern Treasury will not be far behind. We will also be watching startups making headway in different regions, such as Ant Financial, Airwallex, and Chipper Cash.

Another wave of innovation will come from web3, as blockchain technology and cryptocurrency companies are certainly innovating in the payments space. Companies in this area will be added selectively as they gain market traction and support from regulators.

Please let us know what you think! We’d love to hear your feedback. Are there companies we should keep an eye on, or innovative payment experiences you’d like to share? Join the conversation on Twitter with the cashtag $TPAIN.

If you’d like to build your own index, give the Thematic Index Builder a whirl. It’s got everything you need, and free to use.