Investing Apps are enabling more people to trade in global markets, creating new risks, boundless rewards and reshaping trading as we know it.
During the pandemic, the number of people trading in financial markets around the world soared. Credit Suisse estimates that retail investors accounted for one-third of all the trading on the US stock market in 2021, with those using investing apps making up a sizable portion of this number (Financial Times).
With more time at home, readily accessible investment advice and the availability of easy-to-use mobile apps, investing no longer necessitated banks, brokers, or high costs.
These converging factors have made it easier to invest at low volumes and low costs, greatly expanding the market of global investors. User-friendly apps and lower costs of trading have given investors access to trade global markets for the first time. The number of people using these apps grew from 35.6 million in 2017 to over 150 million in 2021 (Business of Apps).
The Trends Behind The Rise of Global Retail Investing and Trading Apps
Traditional investing involves high cost and complexity. Without direct access to a stock trading platform, the majority of personal investors tended to work directly with banks and brokers. The rise of personal finance apps has changed this forever. Individuals can now invest in stocks and assets across global markets without a middleman.
With investing apps anyone can engage in online stock trading directly, using their own devices. Users that started trading in 2020 tend to have smaller account balances, but trade more frequently (Deloitte). They also look for professional financial advice half as much as more experienced traders (FINRA). Stock trading apps are easy-to-use with integrated payments that streamline the transaction process and delight investors.
Easily accessible financial and investor resources and social media is driving increased access and adoption, with money management apps driving activity by promoting trading to new users with educational resources and using gamification to drive engagement.
Investing information and expertise, as dubious as some of it may be, is now readily available through online forums like Reddit’s WallStreetBets, financial chatbots and robo-advisors or individual research. While investors now have more information than ever, the burden remains on them to make sound judgments. Today’s investors are leveraging their trading and personal finance apps for longer-term investment strategies.
Lower Costs For Consumers
Access to zero-commission money management apps allows users to trade 24/7. The financial barriers to entry into the stock market have been removed. Even large traditional platforms offered by Charles Schwab and E-Trade have reduced their fees and commissions to remain competitive. Investors are also not limited by the high price of shares of companies they are keen to invest in.
What Are Fractional Shares?
Fractional shares allow retail investors with limited funds to purchase an interest in shares that trade for thousands of dollars a share. It allows investors to buy a portion of a company’s stock for just a couple of dollars when the whole stock would typically sell for hundreds or even thousands of dollars. This new approach to stock investing has greatly expanded the potential investor market.
Seamless Consumer Payments Experience
Investors expect to be able to trade in their currency, pay with their preferred payment methods, and have their gains immediately available in their accounts. Trading and investing apps looking to cater to international markets must make these options available or risk missing out on large parts of global markets. Trading apps are taking notice, and the market leaders are ensuring that their fintech provides a seamless consumer experience by pre-funding and fronting money to investor accounts to quickly get funds in, and making it just easy for them to get funds out too.
ESG and Value-Based Funds
Today’s investors are more aware of and motivated by global challenges. When making investment decisions, people are more conscious of social and environmental issues. The size of the Environmental, Social and Governance (ESG) investment market was expected to double in 2021 (WealthAdvisor). Investors want opportunities that generate a financial return – but also address global challenges such as climate change, disease, and addressing inequality issues.
Over 80% of investors surveyed were interested in putting their funds into socially and environmentally responsible companies (Global Scan). Another 72% actively avoid industries that are contributing to climate change. Research shows that investors want to put their money into companies that are socially and environmentally responsible.
Another area of interest for retail investors is Value-Based funds. These are generally well-established companies that pay dividends. These tend not to be early-stage companies with high growth (and higher risk) prospects. Value investors look for stocks trading for less than their intrinsic value. They carry out research to look at the financial fundamentals of the company to assess the value in relation to the stock price. These value stocks can have as much, if not more, long-term potential as growth stocks.
More Consumers Are Investing In Crypto
Cryptocurrencies are known for their volatility, with massive plunges followed by huge surges. Some also believe they could become a key asset class in the future. Retail investors have shown a strong interest in crypto with many entering the market recently looking to trade around highs and lows. Data published in March 2021 by JPMorgan showed that retail investors had purchased around 187,000 Bitcoin over the quarter, outpacing institutions that had acquired 173,000 coins.
More retail investors are moving into this market and many see it as an exciting area of investment where they can make huge potential gains in a short timeframe. In this recent report from CNBC, 65% of the cryptocurrency investors surveyed initially invested in just the last year. This increase in retail investors is affecting market dynamics as these traders tend to buy and sell more over short periods of time which increases market volatility.
Retail Investors Are Reshaping Investing
These trends have ushed in a new era of investing, giving rise to retail investors fundamentally different from their institutional counterparts. They tend to be influenced more by social media and news cycles rather than the traditional financial wisdom. This emerging investor class drove revenues for trading platforms from $3.8 billion in 2017 to $10.9 billion in 2020, growth that shows no sign of stopping anytime soon.
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Financial Times. “Rise of the retail army: the amateur traders transforming markets” https://www.ft.com/content/7a91e3ea-b9ec-4611-9a03-a8dd3b8bddb5 MARCH 9 2021 Accessed April, 2022
Business of Apps. “Stock Trading & Investing App Revenue and Usage Statistics (2022)”, https://www.businessofapps.com/data/stock-trading-app-market/ JANUARY 19, 2022 Accessed April, 2022
Deloitte. “The rise of newly empowered retail investors” https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-the-rise-of-newly-empowered-retail-investors-2021.pdf 2021, Accessed April, 2022
FINRA Investor Education Foundation. “Investing 2020: New Accounts and the People Who Opened Them”, https://www.finrafoundation.org/sites/finrafoundation/files/investing-2020-new-accounts-and-the-people-who-opened-them_1_0.pdf February 2021
Wealth Advisor. “Study reveals growing demand for impact investing among retail investors” https://www.wealthadviser.co/2021/04/28/299423/study-reveals-growing-demand-impact-investing-among-retail-investors 28/04/2021 Accessed April, 2022=
GlobeScan “Retail Investors Show Strong and Growing Interest in ESG” https://globescan.com/2021/12/14/retail-investors-show-strong-and-growing-interest-in-esg/ December 14, 2021 Accessed April, 2022
TheStreet: “JPMorgan: Retail Bitcoin Buying Grows as Institutional Purchasing Slows. JPMorgan data shows retail traders are piling in.”
https://www.thestreet.com/crypto/bitcoin/jpmorgan-retail-bitcoin-buying-grows-as-institutional-purchasing-slows MAR 16, 2021 Accessed April, 2022
CNBC. “1 in 10 people currently invest in cryptocurrencies, many for ease of trading, CNBC survey finds”, https://www.cnbc.com/2021/08/24/1-in-10-people-invest-in-cryptocurrencies-many-for-ease-of-trading.html AUG 24 2021 Accessed April, 2022