In Adjust’s Mobile App Trends report, we explored the recent performance of FinTech apps, highlighting reports that banking app revenue reached $6.8 billion last year—(an 88% increase on 2020) and that over half of purchases (52%) were made with a digital wallet in 2021, and use of cash declined 42% compared to 2019. Adjust data itself showed a 19% increase in finance app downloads compared to 2020.
As the industry continues to grow, there are huge opportunities in the FinTech space for mobile app developers and advertisers alike.
Embracing user privacy
It’s been more than a year since the rollout of iOS 14.5 and Apple’s AppTracking Transparency (ATT) framework. This marked a critical shift in focus towards protecting consumer privacy. Although early predictions for industry-wide ATT opt-in rates were as low as 5%, our recent data shows a much higher rate of 25% — a number that is increasing consistently.
While the opt-in rate for FinTech apps sits below the industry-wide average, at 11%, these changes to data privacy have reinforced the need for marketers in FinTech to extract value from their own first-party data. Given this, we can expect to see continued acceleration in ATT opt-in rates for the FinTech vertical, as more users understand the value of opting in and receiving personalised advertisements.
Therefore, app marketers in the FinTech realm should implement robust opt-in strategies that communicate the benefits of targeted advertising to users. It’s this exact proposition, which has already been communicated for years, that’s led to hyper-casual games consent rates reaching as high as 40%.
Maintaining accelerated install growth
Adjust’s report finds that installs of FinTech apps grew by 35% between 2020 and 2021. Looking at the breakdown of these installations per subvertical. Payment apps make up approximately 57% of the installs share, followed by banking at 34%, stock trading at 7%, and crypto at 2%.
A rise in post-pandemic interest in investing apps continued in 2021, while interest in cryptocurrencies led crypto apps to overtake stock trading apps to become the majority of asset management app downloads. Bitcoin and overall crypto market capitalisation reached new all-time highs in April and November. As expected, we found that coverage of “meme coins” such as Dogecoin and Shiba Inu and the popularity of NFTs on the Ethereum blockchain led to a surge of new users into the FinTech space.
Globally, the share of paid installs relative to organic installs in the FinTech vertical grew from the beginning of 2020 until midway through 2021. Starting at 0.11 and growing to 0.15, 2021 ended with a ratio of 0.14. The most exponential growth can be seen in the crypto vertical, which started in 2020 at 0.11 and finished in 2021 at 0.23, indicating that the big increase in paid campaigns for cryptocurrency apps also, logically, resulted in a boost in the number of paid installs. Banking’s ratio dropped consistently, starting at 0.12 and finishing at 0.07, showing that the increased need and interest in banking apps caused users to seek the apps out themselves.
With more users than ever before flocking to FinTech apps, we know that marketers and developers are looking to expand their channel mixes to capture the largest number of potential new customers. We found that this was reflected in our trends data, as the number of partners each FinTech app is working with has also increased alongside the competition. What’s more, the average number of partners for the vertical as a whole grew from 3-4 in 2021. Crypto saw the greatest increase — starting in 2020 with an average of 2.5 partners per app and finishing in 2021 with an average of 4.5.
Increasing sessions and understanding user behaviour
With an increase of 53% globally, the growth of FinTech app sessions recorded is even more significant. Our findings highlight a boost in engagement within the vertical, as existing and newly acquired users record more sessions than ever before. While global sessions follow a continued upward trend throughout the year, the highest point can be seen in April, which was 92% higher than the 2020 average, and 27% up on the rest of 2021.
The breakdown of sessions across the FinTech subvertical differs significantly from what we saw for installs. Banking takes first place at 46%, followed by payment at 31%. Stock trading and crypto take more of the sessions share than the installs share, at 17% and 6%, respectively. This suggests that the users who download apps in these categories are clocking more sessions than those using banking and payment apps.
We discovered that this high level of engagement is also reflected in the length of sessions by users in each subvertical, with the most significant growth seen among crypto apps. Session lengths in crypto and stock trading are consistently longer than those in banking and payment, which aligns with the business models of each category. While a payment app might only be needed for a number of seconds for a task to be fulfilled, users buying and selling stocks or cryptocurrencies likely need to spend much longer to complete actions.
According to Adjust’s report, in-app revenue for FinTech apps is also increasing steadily, showing consistent growth from January 2020 through to December 2021. While subscriptions, third parties (sellers and beneficiaries), and advertising are the key ways that FinTechs monetise, we recognise that subscription models have become increasingly prominent. This helps to drive the increase in in-app revenue, as many FinTechs have progressed from the growth stage into the profitability stage.
What next for mobile FinTech?
In 2021, we saw the shift toward mobile accelerate, with more users than ever before turning to apps for their financial needs. With installs and sessions in the vertical increasing across all regions and subverticals, it is clear that the global FinTech app ecosystem is thriving, and continued growth can be expected from this space for the remainder of the year.
As for what’s coming next for the future of mobile FinTech, we expect to see growth in Buy Now, Pay Later (BNPL) services, digital wallets enabling access to cryptocurrencies, as well as cloud banking from traditional banks. For mobile app marketers in the FinTech space, focusing on getting the opt-in is crucial. Although numbers are comparatively low, pushing this rate up by even a couple of percentage points can prove invaluable when it comes to building out conversion value models and predictive strategies for the aggregated SKAdNetwork data set. Focusing on finding these high-value users is key, along with building retention strategies that keep them sticking around. The best way to achieve this perfect balance is to improve the accuracy of your campaigns and to create a user experience that is perfectly optimised to your specific audience segments. Drilling down into your data to determine the key touch points along the user journey is how you’ll achieve this—great data makes for great insights.
Finance Monthly hears from Andrew Lawson, SVP EMEA at Zendesk, who discusses the growing divide in the banking sector and how retail banks might become competitive once again.
As the economic fallout of COVID-19 continues, businesses feel the pressure to remain resilient and agile in order to stay competitive. And retail banks are no exception. According to the latest World Retail Banking Report, there has been a disconnect between short-term cost-cutting objectives and long-term digital transformation investment needed for incumbent banks to thrive. In fact, the report indicates a disconnect between what customers want and what banks are actually prioritising.
Right now, retail banking customers expect the same service they would get from any other business, and the pandemic is no longer an excuse for poor customer service. Thankfully, Zendesk’s Customer Experience (CX) Trends Report, shows many traditional bricks and mortar financial institutions who were previously slow in the shift to digital, have reacted fast in order to up their service game. The same research indicates that more than half of financial services companies reported that they increased their CX budget in 2020.
Consumer demand is growing for more personalised advice. Existing retail banks have access to decades-worth of data on their customers. When analysed carefully, this data is rich in details on what their customers want most from their bank. How can retail banks use this, to not only inform personal customer interactions but to transform the customer experience they offer for the digital-first culture?
The CX divide in retail banking
Gone are the days of a ‘bank for life’. Digitally native Gen Zers are the least likely generation to stick to their bank, as more than half switched their main bank account within two years of turning 18.
It is clear that younger customers aren’t hesitant to make a change if another provider ticks all of their boxes and delivers on their CX expectations. The rise of digital banking has made it easier than ever to move money between accounts – or, indeed, banks. In fact, with legislation like the 2015 EU Directive PSD2, regulated payment services have put digital and mobile-first banks on a level playing field with traditional high street and household names.
Gone are the days of a ‘bank for life’.
Meanwhile, new banking startups entering the field are transforming customer experience expectations in the banking sector, making it easy for customers to get advice, help and support across many channels with a unified experience. From real-time balance updates to budgeting support solutions and even the ability to split the bill and connect your banking with your friends, these features are now integral parts of the banking experience that incumbents need to match to bridge the divide with challengers.
One digital-first bank that has been able to quickly fill an accelerated experience gap is Mettle. The free business bank account offered by NatWest aims to support the rise in the passion economy. That is, people setting up businesses for the very first time. And, what’s more, the demand for this type of service has skyrocketed, with more than 200,000 new companies formed post-lockdown-1.0. Mettle’s biggest challenge was communications back to its customers. Business founders are traditionally time-poor and as such, expect a fast and seamless service from their banking provider.
With a connected service platform, Mettle has been able to listen, iterate and build upon what is important to its customers. Taking a digital-first approach to banking, with integrated self-service platforms and free accounting software enabled the team to take a more flexible approach to service. Being open to customers about what they can and can’t offer has also been a crucial part of reducing the stress for customers and making banking simpler. Mettle’s customer-centric approach helped grow its customer base by 120% in the second half of last year, and the company to connect their understanding of the customer across the business.
A cultural transition
Another area where CX teams at retail banks can find quick wins is in the delivery of frictionless digital services, which are paramount to remaining resilient in the face of COVID.
Retail banks need to be able to deliver a consistent digital-first service and meet customers where they are, when they need it most. Already, almost three quarters of customer service agents state that they have the tools they need to work remotely and, what’s more, 58% of agents have regular access to support from developers to customise customer solutions, allowing them to remain adaptable to changing needs.
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We see then that a true transformation in the way the industry behaves is here to stay – one built on agility, superior CX and omnichannel banking – but there is still progress to be made. Since the rise of smartphones and app-based banking, customers have come to expect instant access to their accounts - digital banking isn’t just a nice option to have, anymore. As such, financial services organisations will need to find ways to differentiate themselves and remain agile and flexible in an environment of constant change.
Simply being online isn’t enough. Customers want speed and convenience, but they are also seeking commitment to the issues they care about. To keep pace with the ongoing shift in consumer behaviour and expectations, you need to be laser focused in your approach to CX. The bar has been set - and it’s high.
It’s no wonder why so many are looking to trade Bitcoin. The virtual currency is revolutionising financial markets all over the world and brings many benefits to users. That’s why the number of Bitcoin traders is on the rise.
But you can’t just start trading right away. In other words, you’ll need some practice, because trading is far from easy. You’ll need to keep track of various assets, see how the value fluctuates, know which currencies to sell and buy, analyse the market, and so on. In short, you’ll need to learn how to deal with various situations.
You can learn this thanks to the gaming industry. This industry has stayed popular for years by adapting to technological trends. That’s how hardware got stronger and the games got better. This is the reason why Bitcoin has found a place in the industry. But what does this have to do with learning Bitcoin trading?
How the Apps Came to Be
Game developers have produced a couple of games inspired by Bitcoin. Some of them are Bitcoin trading simulators which means they’ll come in handy when it comes to learning to trade. All you need to do is install them on a mobile device of your choice and start learning. Here are some of those apps:
Bitcoin Hero
This app lets you experience a virtual market with real-time prices. This means that you’ll be able to make mistakes as much as you want to while you’re learning to trade Bitcoin. You won’t feel the consequences and you’ll pick up some good skills along the way. If this seems like too much work for you, then you can always go for the alternative. Trading platforms will help you with that.
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Trading platforms like Oil Profit exist to do the same thing as any other trader. They can go through the information and make decisions based on their settings. Making an account is a must when it comes to using the services of the platform. You’ll need to make a small deposit as well. There will be some tutorials and a demo lesson that you’ll need to go over to make sure you understand the settings of the platform. Afterward, you can set it and go for a live session. Then you can set the settings however you want to and see the different outcomes.
Altcoin Fantasy
Game developers take other cryptocurrencies into account as well. This means that there are some trading simulator apps that don’t just cover Bitcoin, but other virtual currencies as well. Altcoin Fantasy is such an app. You can use it to learn how to trade Bitcoin or any other cryptocurrency you fancy. You’ll get the virtual market, virtual currency, and real-time competition in the shape of other players. In short, you’ll get proper trading training.
But this isn’t the only thing the app has to offer. In Altcoin Fantasy there are competitions to see who the most skilled trader is. You can take part in them or organise them, and if you manage to turn out on top then you’ll be rewarded with a specific amount of Bitcoin or another cryptocurrency.
Conclusion
The value of this virtual currency is something to keep in mind as a trader. Also, make sure to do ample research when it comes to picking an exchange and choosing a wallet. An exchange with a history of hacker attacks will spell doom for your Bitcoin assets, so stay away from such exchanges. The wallet you choose needs to have good security measures, a user-friendly interface, and to suit your needs. By getting all these concepts and some practice you’ll be a pretty good Bitcoin trader.
Shares in food delivery startup Deliveroo rallied on Wednesday as its first day of unconditional trading on the London Stock Exchange began.
Wednesday marked the first time that retail investors could trade shares in Deliveroo, including the 70,000 who invested in the company’s IPO. It followed a week of “conditional” trading that began last week, during which only institutional investors could trade stakes in Deliveroo.
The firm’s shares rose 3.2% in early trading, reaching as high as 289.05 pence per share. However, this is still roughly 25% below the shares’ asking price of 390p during its £7.6 billion IPO, which saw a precipitous first-day tumble after lifting on the LSE – becoming one of the weakest IPOs in FTSE history.
UK Chancellor Rishi Sunak, who prior to the IPO had lauded Deliveroo as a “true British tech success story”, said he was not embarrassed by the plunge in share value. “Share prices go up, share prices go down,” he said in an interview with ITV.
However, several major UK investment fund managers have said they will not buy shares in Deliveroo, citing concerns over lack of investor power and the working conditions of its delivery riders. Firms backing away from the company include Aberdeen Standard, Aviva Investors, BMO Global, CCLA, Legal and General Investment Management and M&G.
The news comes as hundreds of Deliveroo drivers planned to strike on Wednesday amid calls for higher pay. Only 400 of the firm’s 50,000 riders are estimated to be taking part in strike action, as Deliveroo’s survey data showed that 90% of its riders were happy with the firm.
Video games have been popular for years, which means they will continue to grow in the future. The industry's ability to adapt to the trends is what guarantees this. As a result of this ability, gamers all over the world have purchased all kinds of games and upgrades to their gaming devices.
In other words, the gaming industry is a sucker for new trends. It makes sure to incorporate them and satisfy its customers. Bitcoin is one of the current trends nowadays and it has already found a place in the industry. It’s a viable payment method for some gaming sites and it has already inspired game developers with its blockchain technology.
It is because of that that we have a few Bitcoin titles that anyone can play. They come in various shapes and sizes which means that they are in different genres. Moreover, it gives players a fresh taste of familiar types of games and brings then a new kind of game – the crypto game on the gaming market. So, if you’re looking to give these games a try, here are some suggestions:
Bitcoin Hero
This is a Bitcoin trading app that newbie traders will find quite useful. It has a virtual currency that you can use to start trading with. Also, the other players will serve as your competition. Additionally, you’ll have tools to research the market with.
You’ll have plenty of practice with Bitcoin Hero and the best part is that all the assets have real-time prices. Also, you can make as many mistakes as you’d like because you won’t feel the consequences. Naturally, there’s another path you can take if you think you can’t handle the risk of trading Bitcoin. You won’t have to make any important decisions and you’ll just reap the profits.
Video games have been popular for years, which means they will continue to grow in the future. The industry's ability to adapt to the trends is what guarantees this.
The trading platforms represent this option. These platforms make use of advanced algorithms to make the important decisions for you. In other words, they do the heavy lifting and leave none of the hard work for you. Among the many platforms, you’ll come across the Bitcoin Sites. To use them you’ll need to make an account and deposit the minimum amount. Then you’ll need to go over the tutorials and then a demo lesson. Once you’re familiar with the settings then you can try the platform out with a live session. Afterward, you can adapt the settings as much as you like.
Splinterlands
Unlike the previous entry, this isn’t an educational title. Splinterlands is a Bitcoin trading card game that lets you build your deck while defeating various opponents. You have cards from all kinds of factions and earn them as you beat your opponents.
Naturally, you can use Bitcoin to buy new cards and other collectibles to strengthen your deck and improve your chances in the game. In other words, Splinterlands isn’t just a game you can play in your free time, it’s a great way to challenge your decision-making skills.
Bitcoin Blast
Bitcoin Blast is a title that features the ever-popular Bitcoin symbol. It comes in several colors and your job is to match as many of them as you can. You’ll get points for your efforts and the more effort you put in the more points you’ll get.
Also, the prizes are another reasons to play this game. That’s because they’re made up of actual Bitcoin. So, you won’t be just enjoying Bitcoin Blast but you could play it so you could earn some. Similar to the previous entry on this list, Bitcoin Blast is a challenge that can help you win interesting prizes.
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Merge Cats
Merge Cats is a simple title and a simple goal expressed in the title. In other words, you get plenty of cats and you’ll need to match them to get ahead in the game. The more effort you put in the more rewards you’ll get. The game comes with its daily challenges that you can take part in. If you, then you’ll need to complete them to reap the rewards which are in Bitcoin.
Conclusion
The revenue of the industry shows you just much the industry has grown throughout the years. Thanks to the adaptability to trends gaming is going to grow in revenue and Bitcoin will have an important role in the industry in the years to come.
London-based fintech unicorn Revolut has started to apply for a bank charter in the US, the firm announced on Monday.
On the first anniversary of its US launch, the company submitted a draft application with the Federal Deposit Insurance Corporation (FDIC) and the California Department of Financial Protection and Innovation, the first step in the banking license application process.
“A US banking license would ultimately enable us to provide US customers with all the essential financial products and services they can expect from their primary bank including loans and deposits,” Nik Storonsky, co-founder and CEO of Revolut, said in a statement.
“We’re on a mission to build the world’s first global financial superapp, and pursuing a US banking licence is an integral part of the journey.”
Revolut was granted an EU banking license in Lithuania in December 2018, allowing it to offer banking services in Central Europe. It applied to the FCA and the Prudential Regulation Authority for a UK banking license in January.
The startup also intends to launch its business accounts in all 50 US states. These accounts allow companies to make free money transfers in 29 currencies at the interbank exchange rate, among other features.
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Since launching in the UK in 2015, Revolut has built a customer base of more than 15 million across nearly 40 different countries. Its flagship products include an app-linked debit card that allows users to spend different currencies at the interbank exchange rate with low fees attached.
Revolut’s fintech peers are also seeking bank charters in the US. In February, Brex announced that it would apply for a bank charter in Utah, while Varo Bank obtained a license last summer.
Many tools and apps have been designed to assist stock traders in day-to-day trading. These apps can help you analyse your potential stock investments while minimising the risks. A trader needs a good trading platform based on the market they prefer to trade in. But other than that, we believe that every trader needs these five apps to capitalise on opportunities with minimum risk.
Portfolio Tracker Apps
A portfolio tracker is an essential part of preparing yourself for stock trading. It is especially useful for traders who hold a position overnight or invest money in long-term trades. You can use it to track a stock portfolio before and after you invest in it. A stock portfolio tracker can help you make smart investment decisions.
You can also use it to manage your budget and keep a record of all your investments. Sometimes traders tend to hold onto losing positions, hoping that they would be able to earn their money back.
A portfolio tracker will remind you to stay away from bad investments. You can also use it to identify the trades and investments that are right for you. These are some of the features that you must look for when choosing a stock portfolio tracker:
- Number of stocks tracked
- Integration for brokerage
- Stock analysis tools
- Integration of news feed
Stock Charts Apps
You might need a stock chart to plan your future trades. It will provide you a graphical representation of the stock data along with the price and volume. A simple stock chart will display the price data as a line graph, which will keep changing with time.
A trader needs a good trading platform based on the market they prefer to trade in.
Some stock charts also display candlestick charts as indicators for trading volumes. Many complex stock chart apps allow you to set any added indicators that you need to analyse your trading activity. There are many free stock chart apps available, but they come with certain limitations.
You can expect a 15-minute delay on the chart updates, which may not be apt for day trading. Some free charts also have limits on the volume reports and would only display limited information on exchanges. On the other hand, paid apps will provide real-time price and volume updates and several other charting options.
Financial News Apps
With stock trading and investments, news updates and your reaction time can make a huge difference to your profits or losses. Therefore, you must have financial news apps on your smartphone. They give you access to actionable business information, financial news, and stock market data.
You can switch on notifications for breaking news alerts to take real-time action. Some apps also give you access to interactive charts, real-time stock quotes, and global business news.
Practice Trading Apps
Practice trading apps are investment simulators that help you prepare for stock trading without any risks before you invest in real trades. It gives you the experience of trading in the stock market so that you can get a hang of it. You will be able to invest virtual dollars in the trading simulator and see whether your choice of stock would have been profitable or not.
It allows you to test your stock analysis skills and come up with learning goals. You can also use practice trading to formulate multiple investment strategies for the future. It is a useful tool to learn the intricate working patterns of stock markets and practice the theories.
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Automated Trading Apps
Automated trading apps are the perfect solution for you if you want to take the psychological elements like emotions out of the trading. You can use these apps to set your parameters to choose potential stocks, allocate investments, and open or close positions. But using an automated trading app does not mean that there are no risks involved.
You would still have to set the initial guidelines along with the entry and exit positions. The app will use its algorithms to monitor the stock market according to the conditions you have set. There are many advantages and disadvantages of using automated trading apps, so consider them carefully before you choose to use one.
So which are the right apps that can give you an edge to earn maximum profits and minimize losses? It is probably one of the most debatable topics because every trader has their own choice of apps and tools. There is no doubt that certain apps are better than others, so read reviews and get referrals before you select the apps for your trading arsenal.
Tiffany Carpenter, Head of Customer Intelligence at SAS UK & Ireland, offers her thoughts on how established banks can offer customers a better remote service.
Businesses have faced numerous challenges as a result of COVID-19; perhaps the greatest they have ever had to contend with. However, from a customer experience point of view, there have also been some new opportunities. Across the private sector, SAS research shows that the number of digital users grew 10% during lockdown, with 58% of those intending to continue usage. This represents a whole new dataset of customers with a digital footprint, offering the chance for businesses to engage with them in a more personalised way.
It seems that many businesses have been taking advantage of this already. Across the board, a quarter of customers noted an improvement in customer experience over lockdown. Yet, in the banking and finance industries, 12% of customers claimed that their customer experience had diminished, which was more than the average for the private sector.
What makes this particularly concerning for banks is that, as an industry, they are one of the most digitally mature. Of all the industries, they had the highest number of pre-existing digital users, with 58% of customers using an app or digital service prior to lockdown. So, the question is: why did the most digitally mature industry struggle to support all its customers through digital channels during the pandemic?
A truncated digital experience
As demonstrated by the sheer number of customers using their digital services and apps, the banking industry hasn’t struggled to get its customers to go digital. However, it has clearly struggled to support all of its customers during the pandemic.
While more customers noted an improvement in the customer experience over lockdown (27%), 12% still felt that it had got worse. Branch closures and lengthy call waiting times to speak to an advisor by telephone won’t have helped. In this age of digital transformation, customers were unable to access immediate support or advice through digital channels and were forced to pick up the phone or fill out paperwork to complete an action. Many businesses applying for bounce back loans found themselves in error-riddled, drawn-out processes, often waiting weeks with no status update, while customers wanting advice on payment holidays found their bank’s digital communication channels offered no support at all.
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Going the extra mile
Since the scheme was introduced there have been over 1.9 million mortgage payment holidays granted in the UK and, with stricter lockdown measures reintroduced, this number could rise even further.
The problem for banks and customers alike is that much of the decision-making process is manual, such as determining a customer’s eligibility. Automating these decisions would enable banks to deliver support and decisions in real-time to customer applications across their websites and mobile apps, eliminating manual back-end processing tasks and reducing the need for phone calls, paperwork or in-branch communication.
What’s more, automated decisioning does not require a complete overhaul of legacy infrastructure. Cloud-based intelligent decisioning applications allow banks to rapidly deploy solutions that can analyse customer data and behaviours in real time, determine customer intent and needs and arbitrate next best actions across digital channels without the need to rip and replace the current architecture.
While the pandemic remains part of our everyday life, it’s likely that banks will have to contend with sporadic branch closures and/or customers unwilling to either come in-branch for appointments or spend a long time waiting to speak to someone over the phone. Customer feedback has demonstrated that banks have the correct building blocks in place to deal with this effectively. However, they’re still struggling to support their entire customer base. If banks are to compete and succeed both in the short and long term, it’s essential that they complete the ‘last mile’ of their digital transformation.
Stuart Lane, CEO at Trade Nation, shares his findings on the trading habits of millennial and Gen Z investors and how they have been influenced by emerging trading platforms.
There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs. A survey by E*Trade Financial Corp found that over half of younger investors have traded more frequently, and while many have made notable gains, there have also been some serious losses.
Roughly 46% of millennials and Gen Zs are trading derivatives more frequently — double the average rate. What’s more, 51% say their risk tolerance has increased. This makes for a potentially dangerous combination, especially for amateurs, of whom there are plenty. Robinhood (by far the most popular trading app of millennials and Gen Zs) has said almost half of its new customers this year are first-time traders who, therefore, may not know the risks surrounding complex derivatives such as CFDs. As Trade Nation notes: “CFD trading certainly isn’t straightforward and there’s a lot of confusing terminology and hidden costs involved too. This means it usually isn’t the best way for traders to kick off their journey.”
And in addition to the risks individual traders may be opening themselves up to, experts like Princeton economist Burton G. Malkiel believe that the outlandish trading activities of millennials and Gen Zs are also wreaking havoc on the financial markets.
Why are young people trading more?
The general consensus is that trading has been a great way for the younger generations to fill extra time and deal with the boredom of lockdown. As the founder of RagingBull, Jeff Bishop, told CNBC: “A lot of people are at home and have got more time on their hands. And many, unfortunately, have lost their jobs and are looking for new opportunities. Younger investors are looking for ways to recoup their money.” Furthermore, many Americans have been able to fund their trading activities with their government stimulus checks, with software and data aggregation company Envestnet Yodlee reporting that trading was among the most common uses for the checks in almost every income bracket.
There’s been a surge in trading interest among the whole population since the start of the coronavirus pandemic, but especially so in millennials and Gen Zs.
Apps like Robinhood, eToro and RagingBull have also made trading more accessible for these traders, seeing demand for their services rise by 300%, 220% and 158% in the first quarter of 2020, respectively. And given that the vast majority of millennials and Gen Zs have been using their smartphones more due to the coronavirus outbreak, it’s unsurprising that the time spent on apps like these has also increased.
What are millennials and Gen Zs trading?
The E*Trade survey found that almost half of young investors are trading derivatives more frequently compared to 22% of the general population, while there’s been an especially sharp increase in options trading. What’s more, the surprising nature of their most popular stock picks have stunned, and perhaps even humbled, many Wall Street investors.
"We see a lot of buying activity of specific industries that were impacted by the pandemic," said Robinhood co-founder Vladimir Tenev, as reported by CNN. He singled out shares of airlines, videoconferencing and streaming media companies, and biopharmaceuticals. For example, even though Warren Buffet dumped his airline shares in light of the coronavirus travel restrictions, millennial and Gen Z traders had faith in a recovery. Frank Holmes, CEO of US Global Investors, told CNN that he noticed a surge in interest for the JETS airline ETF in March. Examining Robinhood trends, he learned that plenty of young investors had been buying it after a major dip. The funds' assets went from $34.6 million at the start of March to $615 million by the end of April — a 1600% increase.
“Although a lot of people may say that it’s crazy, it has turned out pretty well,” JJ Kinahan, the chief market strategist at TD Ameritrade, told Bloomberg. “Retail investors for the last few months have been a little bit ahead of the curve. There’s been a lot more perhaps optimism among retail traders around the turnaround than there has been from professionals. This continues to show that.” However, it’s inconclusive whether moves like this are really paying off for younger traders. While some analysts (such as those at Goldman Sachs) claim the stocks of Robinhood investors have outperformed hedge funds and the indices, others have found a negative correlation between these stocks and their returns.
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What are the potential problems of this?
Empowered but inexperienced traders
Robinhood has been the app of choice for many millennial and Gen Z traders, and though their ambition to “democratise finance for all” has clearly appealed to this market, it also means that many amateurs have jumped into trading without any experience and gone on to make grave mistakes.
“Robinhood has gamified investing. Trading is now so simple that it can be easy to make impulsive decisions,” one millennial investor told Financial Times writer Siddarth Shrikanth, adding that they immensely regretted the progressively riskier trades they had made during lockdown. Shrinkanth noted that while Robinhood doesn’t provide investment advice, it does “little to deter poor decisions”. For example, almost 200,000 users were holding very complex United States Oil ETFs in the days after it crashed in April. “Why were younger investors drawn into volatile commodity tracker funds, despite repeated warnings from regulators that these risky products were unsuitable for retail investors?” he questioned.
Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks. And as well as the potential for devastating losses, this can also come at a tragic human cost. Alex Kearns, a 20-year-old Robinhood trader died by suicide after seeing an unexpected $730,000 negative balance on his account, which he didn’t understand and may have only been temporary.
Many millennials and Gen Zs are diving into trading complicated financial instruments without fully understanding the risks.
Volatile markets
In addition to the potential problems for individual millennial and Gen Z traders, it’s also thought that their activities may be having a significant impact on the markets. For example, having filed for bankruptcy in May, Hertz shares had surged 800% just a few weeks later, with this being one of the most popular Robinhood stocks. Stocks like these may be rallying because of the sheer number of users on the platform — there were more than 160,000 Robinhood investors who owned Hertz stock as of 17 June.
That said, not everyone believes millennial and Gen Z traders are responsible for inflated stock prices. “In June, Barclays published a study of moves in the S&P 500 and positions taken by ‘Robinhooders’,” explained The Telegraph’s Garry White. “It concluded that retail investors speculating in stocks are not responsible for the market’s rally and the top picks of the app’s users tended to underperform, and moves in the S&P 500 were independent of the positions taken on these apps.” He also concluded that while many Robinhood users may see big gains, ultimately: “this strategy needs a lot of attention to follow market moves and it seems inevitable that most will eventually lose money”.
Nigel Frith, vice president of financial services at AskTraders, discusses how challenger banks have revolutionised the banking industry and the opportunities more traditional banks can explore as they aim to extend their digital offerings.
As the high street has evolved in order to meet the changing needs of consumers, retailers have been left with no option other than to reinvent themselves. The banking industry certainly hasn’t been immune to these shifting trends either and as a result, over the last few years traditional banks have been forced to adapt and change the way they operate. While their face-to-face services still remain a crucial string to their bow, banks have had to invest heavily in their digital offerings in order to compete with increasingly popular digital-first providers. So, why are these challenger banks such as Monzo and Starling so attractive to customers and how have the big players in the industry risen to this digital challenge?
A focus on challenger banks
With their chic apps and personalised offerings, new banks can’t be found on the high street but are instead on your mobile phone. Their customer-centric approach has simplified banking by providing users with features which make daily tasks that little bit easier. From being able to split the cost of meals with friends to keeping track of monthly outgoings, these app-based services have really hit the spot in the eyes of many.
With more than four million customers, Monzo is perhaps the most well-known challenger bank. It started out in 2015 as a prepaid card that could be topped up via its app before transforming into a sole banking brand in 2017. It offers all of the usual current account services regular banks provide but also enables customers to manage their money in an effective and efficient manner. The ease at which you can navigate through the app is certainly a big draw for digital-savvy youngsters who are able to quickly transfer money to their friends and set monthly budgets.
In recent years it has continued to broaden its services such as by adopting a ‘get paid early’ feature which allows users to be paid their salary or student loan a day early. By embracing a channel-based communication model, Monzo has also been able to respond to incidents such as outages in a typically effective fashion. Customers can report any issues using a chat service on the app and they have the ability to freeze a card from their phone should they lose it.
With their chic apps and personalised offerings, new banks can’t be found on the high street but are instead on your mobile phone.
Another major benefit of banking with Monzo and many of its other app-based competitors is that it doesn’t have any foreign transaction fees for spending. It has therefore become a highly attractive option with regular travellers and holidaymakers alike.
How traditional banks have risen to the challenge
Although recent analysis of bank branch data has revealed that (if the current rate of closures was to be maintained) there would be no high street banks left by April 2032, there is clearly still a demand for in-person banking. Many people still feel more comfortable going into a bank to pay-in cheques while others are reliant on the financial advice they can access in-store. Clearly there remains a need for traditional banks, such as the big four in the UK - Barclays, Lloyds Banking Group, HSBC and RBS - to evolve their offerings.
In recent years, therefore, these banks have invested heavily in their online and mobile banking services in a bid to compete with digital-first providers like Monzo. This has included providing customers with perks such as being able to pay for purchases using virtual cards on their apps and providing them with the ability to cash-in cheques from the comfort of their own homes.
Leading the way has been Barclays who in 2017 invested £4,148 million into their digital platforms. Now, more than 90% of Barclays’ transactions take place over mobile devices, emphasising the effective nature of their transition to a more digitally-focused way of operating. In December 2018, Barclays also designed a feature which allowed customers to turn off payments towards certain websites should they feel they are unable to curb their spending. More recently, it has taken things a step further by enabling users to view the accounts they hold with rival banks on their platforms - an option which would have been unthinkable a decade ago.
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Key to ensuring customers have felt comfortable transitioning to these digital services has been the commitment banks have shown towards tackling cyber crime. This has seen the banking industry team up with the government, police and other regulators in recent years. Initiatives have been set up to not only raise awareness of the threat scammers pose but to also reassure customers of the stringent measures banks have in place to protect their personal data. Last year, UK banking security systems prevented fraud on an estimated £1.4 billion scale, demonstrating the importance of their investment into tackling cyber crime.
The future
With banks now constantly innovating in a bid to steal a march on their competitors, it is likely we’ll continue to see big changes taking place within the industry over the coming years. One thing that is clear though is that there will be a continued drive by providers to further improve and simplify the customer experience. Although further high street branch closures are inevitable, banks are working hard to maintain their in-person services for those who prefer to operate in this capacity also. While digital banking isn’t for everyone, the ease and efficiency at which millions of people can now complete financial tasks has left a lasting impression on many.
In a statement on Thursday, trading app Robinhood confirmed that a “limited number” of customer accounts had been targeted by cybercriminals, though the Robinhood service itself had not been compromised.
Though Robinhood did not specify exactly how many accounts had been affected, it had been previously reported by Bloomberg that almost 2,000 customer accounts had been infiltrated, citing a person with knowledge of Robinhood’s internal probe.
The attacks prompted a backlash on social media, with several users failing to contact the company, which does not list a customer service phone number. Bloomberg’s report noted that Robinhood was considering adding a phone number in addition to other tools.
Robinhood said that the accounts may have been compromised after cybercriminals breached personal email accounts outside of their service.
"The security of Robinhood customer accounts is a top priority and something we take very seriously," the company said in a statement. “We always respond to customers reporting fraudulent or suspicious activity and work as quickly as possible to complete investigations.”
Robinhood is now working with affected customers to secure their accounts, advising that users use two-factor authentication to better protect their data. "2FA adds a strong layer of protection for your account, even if your password is weak, reused, or becomes compromised,” the company said in a push notification sent to customers last week to mark National Cybersecurity Awareness Month.
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Robinhood is a California-based company that offers financial services to 13 million customers through its mobile app and website, enabling them to invest in stocks, ETFS and cryptocurrencies.
Simon De Broise, Senior Associate at Collyer Bristow, examines the likely impact of the acquisition on the two companies and the financial sector as a whole.
The UK Competition and Markets Authority recently cleared the global card network Visa’s acquisition of Plaid, a US-based fintech, whose primary business is to act as an ‘aggregator’ in the payments sector. The deal, first announced in January of this year, is another interesting tie-up between a fintech and one of the established card networks, and the jury is out on whether this move will help or hinder the open banking movement. The acquisition comes at a somewhat difficult time for Visa, as we recently learned that it is being investigated by the European Commission after complaints of anti-competitive behaviour from e-money providers.
Plaid’s aggregator business provides third-party apps and financial institutions with secure access to consumers’ bank accounts, either by means of the aggregator entering into Application Programming Interface (or API) agreements with the consumer’s bank or by managing the consumer’s banking login details directly (a method that banks are now clamping down on for obvious security reasons).
The benefits of this deal for Plaid are plain to see. The aggregator market is competitive and the issuing banks (i.e. those ultimately sending payments from consumers’ accounts) are in a strong position to decide how and when, and with whom, they do business. For instance, the ‘scraping’ of consumers’ online banking details by aggregators for use with other institutions is increasingly considered by banks to be unnecessarily risky from a data security point of view. This means aggregators entering into an API agreement, which are notoriously difficult for aggregators to negotiate, and so the tie up with Visa is likely to put Plaid in a much stronger negotiating position when it comes to doing business with the large retail banks.
The aggregator market is competitive and the issuing banks (i.e. those ultimately sending payments from consumers’ accounts) are in a strong position to decide how and when, and with whom, they do business.
How the deal benefits Visa is more difficult to see. This is certainly not the first time that Visa has made a relatively large investment in a fintech company – it took a stake in the hugely successful Klarna in 2017 - but, in the scheme of Visa’s existing customer base and market share, the purchase of Plaid seems unlikely to have a big impact on the business. One view is that Visa is positioning itself for the greater adoption of ‘open banking’ (the idea that consumers and SMEs allow financial institutions access to some, or all, of their banking data, which in turn provides them with more advantageous terms on certain products and services). As noted above, this would certainly boost Plaid’s power in the market, in particular when dealing with retail banks, and some suggest that this could lead to a more standardised approach to agreeing APIs, thereby making it easier for other participants also and facilitating the development of open banking more generally.
Another view is that the acquisition has little to do with facilitating open banking for all, but rather that Visa is attempting to control the development of open banking in a way that suits its strategic goal of becoming the ‘network of networks’. The argument goes that the purchase of Plaid simply provides Visa with a further avenue through which to channel its existing business - which is to earn revenue from payment transactions. Precisely how it might do this is not yet clear, but it is quite possible that Visa could introduce a revenue raising measure that is something similar to the interchange fees that are currently levied on card payments.
The European Commission’s investigation into Visa may or may not impact on its strategy for Plaid, but, in any event, how Visa develops it aggregator business will be watched closely in the payments sector. Banks, whilst still in a relatively strong position to dictate business terms, will be conscious that the game has changed somewhat given the scale that Visa can now apply to Plaid’s business operations. Others in the sector, fellow aggregators in particular, will hope that the direction of travel will eventually provide them easier access to banking data and, with it, further opportunities in the open banking market.
