Tying the Pieces Together : A Conversation with Ilam Mougy of Stocks Live

The following is an excerpt from a recent conversation between Nathan Richardson, Founder & CEO of TradeIt and Ilam Mougy, CEO of Stocks Live.

Ilam Mougy wanted to do more than just trade stocks on his phone. He wanted to get advice on how to pick winners and more importantly, be able to chart and track all of his investments in one place. But when he reached out to brokerages to inquire about incorporating them into his app, he found that it would need to be done manually and therefore was impossible from a development perspective.

He knew he’d need another way. The Stocks Live CEO and I sat down to to talk about the integration of TradeIt and TradingView into his app and how our API enabled him to easily integrate users’ portfolios in one click.

Nathan: Tell everyone a little about Stocks Live.

Ilam: Stocks Live is a complete mobile financial solution that helps investors pick and track winning stocks, mutual funds, ETFs, cryptos and more. We offer all the tools investors need to sync their accounts, chart their progress and even see the portfolios of top investors. We are more focused on tracking investments than trading them.

Nathan: So how does the app work?

Ilam: Users sync their brokerage accounts to the app and can track and trade within the app. Our app helps users choose investments, create charts of their progress and our scanner functionality lets them follow the exact investments of what we call ‘gurus’ — successful hedge fund managers like Warren Buffet and Ray Dalio.

Nathan: What made you reach out to TradeIt?

Ilam: I didn’t (laugh), you approached me. When I first built the app, I needed a way to seamlessly integrate users’ portfolios. But, as you know, because APIs aren’t universal from brokerage to brokerage, integrating them wasn’t possible from the development side. When we first launched, there was no way to sync the app with the user’s broker. They could go to a brokerage and open an account but the only way to track that account within Stocks Live was by manually inputting their stocks, purchase price and quantities. A daunting ask.

Someone from TradeIt found me on the App Store and approached me at a trade show, suggesting you’d be a great fit. And honestly, it didn’t take two minutes for me to be convinced, and I did the entire integration in less than a week. Now users sync their accounts once and never again, giving them one app for all their assets in one view.

Nathan: What else has the API integration allowed you to do?

Ilam: With TradeIt’s Account Opening product users can go into our Broker Center within the app, compare and contrast fees and offerings and choose who to open an account with based on what’s best for their needs. In less than five minutes and with one button, they can open that account directly in the app. This is exponentially faster than doing it on the broker website, filling out forms and waiting days for approval. It offers a value-add to the user and moreover, acts as a revenue driver for us since the brokers pay per opening.

Nathan: Talk to me about some of your results.

Ilam: Well, we’ve seen a 20% increase in app downloads and use since the sync feature integration. And there’s been an increased demand from the community around supporting other brokers. So brokerages, you all need to get on board! (laugh)

Nathan: Have there been any hiccups or struggles with the integration?

Ilam: Like any tech integration, there’s ongoing maintenance around feature upgrades, but every addition is maybe a week of work, which is nothing in the software paradigm. Your team is extremely responsive. If I get a user question, within 24 hours there’s a reply and resolution.

Nathan: As you know, we were recently acquired by TradingView, which I see as a perfect marriage of our two technologies. How has that acquisition affected your integration?

Ilam: I’m really pleased about this! StocksLive has a charting engine but not as powerful as TradingView. They have a full library of tools. Our users now have access to all the charts they need to visually view and map their investments. With the integration of TradingView, we now offer three distinct charting features: native charts, TradingView and Tradergram, our new animated charts. I’m very excited about these and no one else is doing them.

Tradergrams visually detail the journey from purchase to sale of a user’s stocks. As we know, people respond better to visual stories and without charting, investors are essentially blind. All they know is the price, but they can’t see the progress. With the addition of these animated charts, users now get both, a built-in feature and an added bonus.  

Nathan: I’m also excited to see how you’re capitalizing on these features and capabilities. Any final thoughts?

Ilam: I see the addition of TradeIt to our app as a full solution. And, there’s a synergy with TradingView and TradeIt that makes these two components vital for any investor. I’m excited to see where else we can go with Stocks Live and how we can further help our users track and trade.

TradingView Acquires TradeIt As Next Piece In Millennial Investing Powerhouse

More than 10 million monthly active users around the world can now trade through major U.S. brokers from anywhere. TradingView – the world’s largest social trading platform and community of active retail investors – today announced the acquisition of fintech API and application pioneer TradeIt.

“TradeIt’s secure and compliant relationships with established U.S. retail brokerages, coupled with their robust integrations with top investing apps, allows TradingView to be part of the backbone of the investing ecosystem,” said Denis Globa, TradingView founder and CEO.

TradeIt’s API and service suite links to more than $70 billion in active assets at top U.S. brokerage firms. Brokers currently see a 10x lift in active user activity and a 5x increase in account funding. Separately, more than 170 developers of retail investing apps use the company’s order-management development tools. Publishers are seeing an 80% increase in time spent.

“The product pipeline of account opening and messaging services being delivered by TradeIt makes TradingView an essential retail investors service,” added Paul Szurek from Insight Venture Partners. Insight led a $37M Series B funding for TradingView in 2018.  

TradingView plans to extend the TradeIt ecosystem with new products including Account Opening and Proxy Messaging Delivery, as well as with new publisher relationships. All TradeIt customers will also now have access to TradingView’s best-in-class charting and quote capabilities. TradingView supplies more than 40,000 Web sites globally with charts and quotes including Crunchbase, Investopedia, SeekingAlpha, Zacks, Binance, CME Group and Entrepreneur.

“TradingView’s vision aligns strongly with our view of the distributed financial networks of the future,” said Nathan Richardson, TradeIt CEO. “We’ve worked with TradingView for several years now, and always felt our complementary products and shared retail investing users makes us stronger together.”

TradingView’s user growth has skyrocketed in the last three years — triple-digit increases in adoption now put monthly active users at more than 8 million in more than 150 countries. Nearly 50% of the TradingView user base is Millennials, with an additional 13% being GenZ. The groups are particularly drawn to the company’s extensive charting expertise. TradingView is a top 1,000 global Web site per Alexa rankings.

The API Ecosystem Defined

APIs have become pervasive. We’ve moved from the days when people would joke that they knew how to spell “API” to APIs driving most of the apps, sites and tools we all use day in and day out. The ecosystems powered by APIs have grown by leaps and bounds, and with this growth, the types of APIs have shifted as providers emerge with specialities and unique value adds. Niche players have grown and API portals have expanded into various industry and functional categories. Many APIs and API providers fall into categories such as thin layer, transactional, or even APIs built based on multiple APIs.    

In looking at the ever-expanding API landscape, there are some basic categories and axises to evaluate APIs. More than ever, API infrastructure is ripe for investment and today’s marketplace is being dubbed the ‘rise of the API economy.’ One of the reasons is overlap; APIs partner together and thrive off each other to function at the highest, most efficient level and drive each other’s success. As we have written in the past, the value chain has morphed in many sectors from a horizontal supply chain to an ecosystem. And this “big bang” has been powered by and enabled by APIs.   

APIs at Work

Let’s use Uber as an example. In order for Uber to meet your needs as a customer it needs to allow you to pay ahead of time, have the vehicle locate you and ensure your driver knows how to get to your destination. To do this, it taps into a payment API (e.g. Stripe), leverages Google Maps to plot the route and then uses an alerting API like Twilio to make sure you know when your driver has arrived.

We can learn a lot from this example, as Uber’s success is driven by different APIs that use different key components to make a robust end user and driver experience. Uber perfectly showcases the use of thin layer APIs, read only APIs, and transaction APIs, as well as partners providing a variety of API management tools — monitoring, analytics, customer support, encryption, etc. All of them coexist and support each other.

API Landscape: Defined

Outlined below are four key categories we have identified in the API landscape. These all bring value and many market participants can and do leverage multiple providers from these different categories. FI’s are great examples of the the type of partner that taps into multiple categories. Many will work with an Apigee to provide a proxy layer, while also working with TradeIt to help open up their APIs to app developers.  

API Portals

Portals bridge providers and consumers and provide information about the API along all stages of its life cycle both on the front and backend. They not only offer tools that cater to developers, they allow providers to make their APIs public, providing consumer access to applications and credentials. And they’re on the rise. In fact, the number of APIs that Apigee’s customers ran on their platform climbed more than 160%, to nearly 36,000, and the traffic running through the Apigee cloud nearly doubled, to an average of 5.3 billion API calls per day at the end of last year.

Key players in this category include:

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Portal benefits:

  • Monitoring tools and dashboards
  • Best practices
  • Analytics
  • Scale
  • Developer portals, deep with resources and documentation

API Integrators

With a consultative approach, Integrators can help you build an API with market requirements and specs. Integrators partner with you to easily bring the functional tech that is the API to your platform. These companies can staff a team for you to work through each aspect of your project and build, distilling services down to the basics to allow for easy building blocks.

Key Integrators: 

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Integrator benefits:

  • Consultative approach
  • Spec and build APIs
  • Bring the knowledge of best practices to the table


Screenscrapers offer a wide breadth of coverage among FIs. They go deep into the small and community banks for some of the widest coverage available. This space is active…and lucrative. (See Plaid’s recent acquisition of Quovo for $200M)

Key API Players driven by Screenscraping:

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Screenscraper benefits:

  • No oAuth security speed bump
  • Single turnkey API
  • Screen-scraped access to multiple FIs
  • Read only data vs. transactional

API Ecosystems

As platforms have emerged, ecosystems have become the dominant force vs. a traditional linear supply chain. APIs have helped to move this evolution along further. The Uber example above is a byproduct of the growth and development of these API ecosystems. Both TradeIt and Stripe offer the technology that provides the connective tissue of an ecosystem in order to bring together partners, but they do this by providing the transactional service required for partner A and partner B (and perhaps C and D) to work together — easily and with streamlined integration. API ecosystems also provide developer tools like an API portal does, but it’s not just a point of connection for data or content; it’s by bringing partners together via a transactional service.

Ecosystem benefits:

  • Analytics
  • Distribution
  • Multiple FIs
  • Security vs. oAuth speed bumps and tokens
  • Visibility
  • Transactional, not a thin API layer

Another Lens

Gartner’s Magic quadrant provides another lens for evaluating the API landscape. By using quadrants for challengers, leaders, visionaries and niche players it compares the completeness of vision vs. an ability to execute.

As the ecosystem for APIs continues to grow with new players and providers — and no matter which type of API technology we’re talking about — there’s no denying that investing in API infrastructure, especially in finance, is growing and necessary. Understanding the unique selling proposition and value add of each is crucial when navigating potential partners. Companies that see the value in creating these shared ecosystems are setting themselves up for mutually beneficial partnerships and of course, financial returns.

Take Amazon, for example. They have a policy of creating open APIs. Their 33 open APIs have been combined with other APIs to create over 300 API mashups. Walmart, by contrast, has only one API that has yielded only one mashup. And while Walmart still beats Amazon in overall sales, it lags behind Amazon with less than one-sixth the online sales. “While there are a variety of explanations for these results, the differences in APIs strategy provide valuable clues contrasting approaches to innovation and customer engagement.”

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First-mover Advantages Matter

The lesson we take from this research is significant. Do you have an API portal? Do you have readily available APIs for developers? Are you requiring APIs from your vendors? We encourage you to think about how APIs working together can enhance the end user experience and bring value to individuals where they are and through the channels they’re engaged with. At TradeIt, we believe building solutions and forging partnerships with this in mind, helps drive value for everyone in the ecosystem.  


TradeIt Account Opening is LIVE

TradeIt Launches Direct Mobile Account Opening for Major Brokers

Our first of its kind, application tool leverages an ID scan to eliminate user abandonment and reduce client acquisition costs…. And users can complete their account opening applications in under 2 minutes!  

We are excited to announce that our new Account Opening SDK is up and running – this new iOS SDK delivers a seamless, fully native experience that will allow users to open new accounts without leaving an app. We have simplified the account opening process by greatly reducing the amount of information the customer must enter manually. Using the iPhone camera, our SDK can scan a driver’s license and pre-populate many of the fields required to open an account. Additionally, all addresses are pre-filled within a few taps using our integration with Google Maps. (Shameless plug… check out a video of one of our first partner’s integration!)


As we wrote last Spring, financial institutions spend the lion-share of their marketing dollars on account acquisition.  Significant dollars are spent for acquisition and yet, abandonment rates are high and continue to be. “According to Forrester, 54% of people filling out financial application forms abandon prior to completion, and on top of this, a recent study by SaleCycle saw financial abandonments reach an average of 79.3%,” quoted Nathan Richardson, CEO of TradeIt. “This is a huge, wasted opportunity considering that customers who attempt to complete an application are expressing a genuine interest in your products and services. In other words, if your process is quick and easy, they will complete their sign up quickly and easily. If it’s not, then you’ve lost a customer and revenue.”

In a previous post, TradeIt conducted time trials to open new brokerage accounts on mobile, only to see application processes take anywhere from 6 minutes to a whooping 12 minutes.  The lengthy process we experienced, coupled with a mobile responsive web experience highlighted to us exactly why drop-off rates are so high. Applying the best practices of mobile UX, we are reducing the user application time by 80%, resulting in more completed applications and reduced client acquisition costs, and a new channel for revenue for our partners.

With only two or three lines of code, partners can simply link into the iOS SDK from an ad or a new menu option. Or add TradeIt’s Broker Center, a pre-build, mobile optimized comparison tool, populated with offers.  Each of these options offers a partner’s audience a variety of compelling offers for brokerage accounts sourced by TradeIt or populated with partners’ own advertisers’ offers. For brokers, we will customize the experience to reflect your specific KYC requirements.  

“We are very excited to be one of the first launch partners of this brand new acquisition tool that no one else is doing,”  says Max Grigoryev, Product Manager at Just2Trade.  “This pioneering solution solves for the 90% abandonment rate seen through traditional account open workflows, and complements the other innovative account opening tools we’ve been developing like our Facebook bot.“

With a simplified flow and best practices for mobile UX in place, we are pushing towards easy and fast, a surefire way to win the acquisition game in the long run.  

For more information on TradeIt’s partnerships, or to create an account, please visit https://www.trade.it/.


The Passing of the Screen Scraping Baton

The FinTech world is buzzing with news of Plaid buying Quovo. Hats off to Quovo’s founder, Lowell, who’s built an excellent reputation in the industry for innovation, professionalism and proprietary technology to enable screen scraping. We’ve received over a dozen inquiries from partners, investors and prognosticators on what the deal means, and, while we have no insider information, we have a few thoughts given our earlier blog series on screen scraping.

There are a few lenses to look at this deal as it relates to what it means to the FinTech space and why it makes sense. We’re going to break it down based on three factors: market structure drivers, systemic reasons and direct reasons.  

Market Structure Drivers

The FinTech world is embracing APIs as the most effective way to interact between institutions, apps and developers — as PSD2 in Europe leads the way. Asian countries are already adopting API protocols. However, since the US has not developed a standard or unified protocol, we can expect more jockeying between screen scrapers and financial institutions, as we saw earlier this year with Plaid & CapitalOne. As long as the US doesn’t mandate standards, screen scraping companies are going to look to gain greater scale and leverage against the more fragmented financial institutions (when’s the last time you saw Citi, JPMorgan, Fidelity & Schwab join forces to protect customer data?).

With 40-70% of FIs website traffic coming from screen scraping companies providing access to Personal Financial Management apps like Mint, FIs have finally woken up to the need to provide secure, controlled access to their products in an increasingly unbundled and distributed world.  FIs are going to require customers to use oAuth to ensure proper security and controls, but traditional US screen scraping companies don’t look favorably on oAuth due to the user experience. The Plaid/CapitalOne battle was a preview of things to come between screen scrapers and Fis, requiring scrapers to go through the front door, not the back.  

Systemic Reasons

If you’re in the screen scraping business and do a value chain analysis, you want to own your own destiny and technology. Screen scrapers exist for a simple reason: to make it easy for FinTechs to enable their clients or customers to aggregate their data in one spot. The screen scrapers create simple and easy to use APIs that customers can integrate and these APIs use screen scraping technology behind the scenes. The technology learns the layout, data formatting and access placements for thousands of FIs, which allows the scrapers to easily enable customers to share their credentials in order to gain entry into the FI. The FI is not a party to this access, it’s a back door. Not all screen scraping companies do this themselves. Quovo did it with robust and secure technology, as do Yodlee and Finicity who often provide their technology to other screen scraping companies like Plaid and MX.    

Data security couldn’t be more paramount to FIs. As much as customers like to demonize banks, banks have done a lot more to protect customer information than big Silicon Valley tech companies. If your user name and password were breached by a portal, hotel company or social network in the last year, it’s likely that the user name and password combination was sold on the dark web. Bad actors on the dark web then run scripts testing your credentials against FIs to get access to your funds. And, while the Fis are proactively monitoring their front door, what many have found is that the bad actors run the scripts via sites using screen scraping to identify vulnerable accounts via the back door. Herein lies the rub. Screen scrapers don’t want to put speed bumps into the user journey, but FIs are requiring oAuth through the front door.  Something has to give, and hopefully it won’t be caused by a breach of your financial information.

Direct Reasons

Plaid and Quovo were direct competitors with similar offerings which could lead to downward pressure on prices. Consolidation will likely allow the combined entity to test price elasticity. Yodlee was the Grand Daddy of screen scraping. Early on, Yodlee bought Vertical One for customers, pricing power and leverage. Yodlee is now owned by Envestnet who has publicly stated that they’ve been focused on making the acquisition pay, meaning they’re increasing prices.

Plaid stated that Quovo’s offering in the wealth space was a driving force for the acquisition.  Yodlee and Morningstar® ByAllAccountsSM have a solid grip on the wealth space, however a combined Plaid/Quovo could result in a greater penetration. And, it doesn’t hurt that Quovo’s founder hails from a storied wealth management lineage, adding to his wealth sector cred.  

Finally, the brands of Plaid and Quovo resonate differently in the broader financial space. Plaid is loved by Silicon Valley FinTechs and Quovo is well-regarded by the established FIs.

In sum, while the financial terms are not readily available, the strategic fit of Plaid and Quovo makes sense — leverage, scale, reputation and technology. Just as Yodlee’s founder stepped away last week from leading his company, the baton (and screen scraping team captain) is now with Plaid’s leadership — run fast and innovate often.

What does 2019 hold for FinTech?

2018 had its fair share of disruption in the FinTech space, but for the most part, companies and investors sat out the end of the year market fluctuations and are cautiously — and perhaps optimistically — looking to 2019. The latest downturn is definitely not unexpected, and if the market continues to soften as most have predicted, we expect to see more acquisitions in FinTech, as investors tighten their belts.

Here are our thoughts on what potential market moves might include:

Chinese FinTechs make another go at the US market

As highlighted in the MIT Technology Review, the Chinese market is much more innovative and disruptive than the US FinTech Market. While the Alipay-Moneygram tie-up failed with regulators, it won’t deter the ambitions of these cash-rich companies.  Notably, Alipay, TenCent, Fosun, CreditEase and PingAn continue to be ever-present at US FinTech conferences, networking, looking to deploy capital, and tempting entrepreneurs with cash offers. Expect to see Chinese companies buying smaller FinTech companies that allow them to fly below the radar of regulators, yet buy and scale with US teams that have strong operating reputations.  

Betterment or WealthFront might get acquired by a smaller incumbent who’s looking to chase down Vanguard and Schwab’s market dominance

Wealthfront got a bump with a $75M investment earlier this year, but some claim that raising money at this stage (10 years in) is a delay tactic if they’re seeking acquisition. Perhaps a “marriage between two leading independent robo advisors is next,” claims Timothy Welsh of Nexus Strategy. He also states that “if robo advisors were going to disrupt, they would have already.” A very debatable stance, in our opinion. But if a merger isn’t in the cards, it’s certainly likely that acquisition is on the table.

The economics of “set it and forget it” firms might catch up with robos as market prices soften

Robos haven’t had to deal with a down market since their inception. As we head into 2019 and likely more volatility, how will they respond and, perhaps more importantly, how will their clients? With a down market and poor returns, will investors stick it out with a “set it and forget it” or will they just say “forget this” and move their funds back to an incumbent? And, though most robo investors are Millennials, will they be ok getting communication about downturns from their advisors solely via email or social media? More importantly for the bottom line, it will be very telling to see if an electronic relationship has the same stickiness as a personal one. According to Greg Curry, a fee-only financial advisor with Pillar Advisors in Louisville, Kentucky, “In a down market many clients need hand holding and the value of interaction with a human financial advisor can be the difference between them sticking with a well-conceived financial plan and investment strategy and making moves that are detrimental to their financial future out of fear.”

With the loss of Robinhood, APEX Clearing looks to sell

Now that Robinhood has built their own clearing system from scratch, what does that mean for APEX Clearing? The last time a major brokerage built something similar was Vanguard, in 2008. It was only five years ago that Apex claimed it was the only company that had the technology to make Robinhood possible. And while right now Robinhood Clearing will only be used on its own platform, they haven’t ruled out the possibility of commercializing it. So, what does this mean for other FinTechs? Is Robinhood Clearing the potential go-to for these solutions? Or, with Robinhood’s recent insurance snafu surrounding their checking and savings account announcement, did they tarnish themselves as a trusted platform/partner?  

N26’s move to the US from Europe will gain ground in the investment world based on their API platform approach

The German mobile bank just received the largest equity financing round in the FinTech industry in Germany to date, as well as one of the largest in Europe. According to their Americas CEO, Nicolas Kopp, they’re “a technology company with a bank license.” Because N26 was built from scratch, and their European roots means they have to comply with PSD2, they’re prepared for open banking protocols. Their design was specifically built for mobile — to be both visually appealing and user friendly, and they support/use APIs, not siloing technology for different lines of business, creating a seamless user experience. And they’ve AI-enabled their platform, allowing them to create more personalization at scale. We’re curious to see what else they have up their sleeve.

What are some of your FinTech predictions for 2019? Share them with us on Twitter using #TradeIt2019 and #FinTechPredictions


What Does It Mean That Incumbents Are Embracing Crypto?

Has Crypto Gone Legit?

It might have been easy in recent years for incumbents, mass market investors and generally the mainstream to dismiss cryptocurrency for several reasons. It’s volatile. It exists virtually. It’s all about anonymity. It’s not regulated. It cuts out the middleman. It was created by a community of  developers. For years, the virtual currency seemed more an underground fad than a true and legit financial resource. But that finally appears to be changing.

Crypto Gets Institutionalized

With the recent announcement from Goldman Sachs that they’ve teamed with billionaire Michael Novogratz to invest in BitGo, a startup that aims to help institutional investors securely store their cryptocurrency, crypto may no longer be the red-headed step child of finance. Between them, Goldman and Galaxy Digital Ventures are investing about $16 million in BitGo. And while this amount is a drop in the bucket for Goldman and Novogratz, it certainly indicates the incumbents taking crypto seriously and realizing their customers are looking for the option to not only invest but have a safe place to keep these investments.

“Greater institutional participation in the digital asset markets requires secure and regulated custody solutions…We view our investment in BitGo as an exciting opportunity to contribute to the evolution of this critical market infrastructure.” – Rana Yared, MD of Goldman Sachs’ Principal Strategic Investments

Coming to Play

Beyond security, Fidelity is taking it a step further, rolling out their own standalone company, Fidelity Digital Asset Services (FDAS). The world’s 5th-largest asset manager has established FDAS for their clients, hedge funds, and FIs to trade and store cryptocurrency. With $7.2 trillion in assets under management, 27 million customers and 13,000+ institutional clients, Fidelity might seem an unlikely candidate to hop on the crypto bandwagon, but they do spend $2.5 billion per year on technology, partially through incubators that house its artificial intelligence and blockchain projects.

It’s also an accessibility play. According to Fidelity Investments chairman and CEO Abigail Johnson, “Our goal is to make digitally native assets, such as bitcoin, more accessible to investors.” Because of their established reputation, and much like Goldman, many clients will likely feel more safe trading and storing with an incumbent over a startup. This is most certainly what Fidelity is banking on.

Will There be an Incumbent Snowball?

Beyond a handful of major players, there’s been a severe shortage of big, incumbent banks actually making the leap. According to Morgan Stanley’s research division, in a new report “Bitcoin Decrypted: A Brief Teach-In and Implications,” they’ve dubbed bitcoin a “new institutional investment class.” The amount of crypto assets under management has been increasing since January 2016, with $7.11 billion currently being stored by hedge funds, venture capital firms and private equity firms. This means if they aren’t already, the other big dogs are surely strategizing their own entry into the space.

According to Digital assets and regulation news outlet, five of the US’ biggest banks are interested in trading Bitcoin, if not already doing it. These include JP Morgan, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley. Morgan Stanley announced a soon-to-be Bitcoin swaps service tied to Bitcoin futures and it plans to have a dedicated trading desk for digital asset derivatives.

But what could be holding them all back from diving headfirst is investor demand.

Don’t Count Out the FinTechs

So, while the incumbents might have the clout, they are also waiting to pull the trigger. This opens the door for FinTechs, especially since the SEC just made it easier for Fintechs to launch ICOs. Their new division, called the Strategic Hub for Innovation and Financial Technology (FinHub) will act as a central point for the securities regulator to interact with entrepreneurs and developers in the fintech space with a particular focus on distributed ledger technology (DLT), automated investment advice, digital marketplace financing and artificial intelligence. It’s doubtful that FinHub will invite a deluge of startups to the crypto party, but it does lend more credence to the virtual currency. Combining the regulation with the incumbent interest, it appears that we are likely talking tip of the iceberg when it comes to the future of cryptocurrency.

RoboAdvisors: The New Destination For $

Shifting Dollars

As more and more younger investors are embracing robos and ETFs vs. actively managed portfolios, the dollars being invested are shifting. As we look ahead to where the assets are going, it’s impossible not to wonder what this means for the economics of the investment firms, asset managers and brokers. ETFs are growing and they’re also a lower cost investment vehicle. Schwab’s annual report is a great example of how assets are flowing into lower cost investment options (ETF growth is booming – up 19%) and the number of client accounts continues to grow (more on that later). But while it’s always good to see growth, and great to know people are investing (!), does this mean there’s a reset coming as it relates to the fees generated (or not) by investment products?  

For large incumbents there’s a cushion, because they’re more diversified as it relates to product offerings, and in turn, revenue streams. But with the shift to a lower cost product like ETFs, and the combination of Millennials pouring money in and Boomers pulling money out, there’s less investing in traditional mutual funds, creating a shift in how incumbents need to think about their revenue streams. And while these companies are seeing gains, with Schwab’s stock price up over a 10 year period, what does this mean for their long term offerings and strategy?

Vanguard is currently king of the robos with $101 billion in AUM, roughly half of all robo assets. In addition to their command of the market, they also see a bump since they serve as the low cost ETF provider to Betterment and Wealthfront. The fees from distribution through these channels translate to more additional revenue for Vanguard.

Schwab is sitting comfortably at number two, with $27 billion across its robo platforms. But the pure-play robo startups, while not in the same hemisphere, are currently holding their own. Betterment and Wealthfront have $13+ billion and $10 billion in AUM, respectively.

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According to a recent report by PricewaterhouseCoopers, experts estimate that robo-advisors could see their AUM increase by over $800 billion over the next five years as they continue to plow investors’ money into ETFs. And A.T. Kearney estimates that digital advice could grow to over $1 trillion by 2020, a 68% increase over current levels.


Who Is Driving Growth?

It’s no secret that Millennials are heavily investing in ETFs and mostly via robos. As we’ve talked about before, it’s a low barrier to entry vs. mutual funds or advisory solutions and investors at this age simply have less assets. But interestingly, new findings of emerging Canadian robo-advising companies describe a higher-than-anticipated demographic of baby boomers and Generation X clients with 44 being the average age of clients. Part of this rapid growth in AUM is due to older clients with larger retirement savings.

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However, according to LendEDU.com, American Millennials are distrusting of robo-advisors, with many stating they still prefer traditional advisors. In addition, a large proportion of millennials who don’t use robo-advisors haven’t heard of them, showing that robo-advising has yet to penetrate the Millennial market.

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And while Gen X and Boomers might be investing in ETFs, the majority of them and their dollars are invested in mutual funds and/actively managed portfolios. These represent greater asset volumes and are also higher cost products.

Will there be a pendulum shift?  

It does appear that way. As older generations move into retirement and withdraw funds, the AUM in traditional mutual funds, actively managed portfolios and among advisory solutions will decline. But, because younger generations are continuing to earn and earn more, it’s likely they’ll continue to pump more into ETFs. The set-it-and-forget-it type investing is ripe for this new audience who wants to dip their toes in the water, including the introduction and usage of target funds as options in 401Ks and IRAs. In fact, according to Statistica as of 2018, passive investing is growing exponentially in the US:

  • AUM in the Robo-Advisors segment currently amounts to $283 Billion
  • AUM are expected to show an annual growth rate (CAGR 2018-2022) of 22.8% resulting in the total amount of $643 Billion by 2022
  • In the Robo-Advisors segment, the number of users is expected to amount to 12 Million by 2022
  • The average AUM per user in the Robo-Advisors segment amounts to $43,039  

Bringing it back to Schwab, their active brokerage accounts are up 6%, their total client assets are up 21% and their proprietary mutual funds are up 19%.

Screen Shot 2018-10-31 at 12.40.18 PM.png

However, total assets among their ETFs more than doubled from 2013 to 2017, an astounding $204 vs $436B. From 2016 to 2017 alone, that was a CAGR of 37% among ETFs vs. 20% for mutual funds during the same period. And only 7% when you look specifically at Schwab’s proprietary mutual funds.

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Some final thoughts:

  • As more investors jump on the ETF & Robo bandwagon and less use full service advisory services and higher cost Mutual Funds, what happens to the fee structure of these firms as more assets move to the lower cost products?
  • Will there be a need to create a new model and what will that model look like?
  • Could we see, as we’ve talked about before, an Amazon Prime model of investing?  

Share your thoughts below or tweet us.


Distribution Matters

The Oceans of Investing

While you read a lot about news publishers complicated relationships with Facebook and Google, the investing space has long been dependent on two oceans for referral traffic — Twitter and Yahoo! Finance. Yahoo! Finance was the original aggregator that fed the referral traffic which built every online company from Marketwatch to SeekingAlpha. The challenger to Yahoo! Finance is not another website but a social network: Twitter, which has more impressions in a week for the top 30 equities than Yahoo! Finance does in a month. With TicToc, Bloomberg is harnessing the Twitter audience to build a counter weight to Yahoo! Finance. We like to think about Yahoo! Finance and Twitter as the Atlantic and Pacific oceans, feeding the tributaries of Bloomberg, Marketwatch, The Street, WSJ, Motley Fool, Forbes and so many more who depend on their mighty engines to flow.

TicToc Dough

It’s clear that externally sourced traffic is only going to increase as more engines feed more content to more places. Bloomberg, for example, gets most of their traffic off network, meaning that most traffic comes from other content providers and social media platforms, as seen from the charts below. A large portion of this can be attributed to their massive Twitter presence as TicToc. With close to 400K followers, 2.2 million average daily views and 1.4 million average daily viewers, this handle drives large amounts of users to their platform and largely increases their brand awareness. It also shows the burgeoning power and importance of Twitter in the finance world.

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Source: SimilarWeb, 09/25/2018

Screen Shot 2018-09-28 at 10.39.56 AM.pngSource: SimilarWeb, 09/25/2018


In fact, the Cashtag, Twitter’s trackable and clickable stock tracker, has propelled the platform’s popularity as a financial news tool. As we saw recently, a CEO can wipe out billions of $ off their company’s market cap with just a tweet. While on the other hand, analysts are now using the platform to speculate about the “next big thing”. Plus, with 330 million active monthly users, Twitter’s reach far exceeds Yahoo! Finance and just about everybody else.

We conducted an analysis of the engagement that’s generated from top equity cashtags, as well as other major market movers from the S&P 100, over 32 randomly selected days and found that average impressions/day accumulate to almost 8MM and reach almost 5MM users.

Screen Shot 2018-09-27 at 3.16.44 PM.pngSource: Keyhole

That’s more than Yahoo! Finance, which gets 70MM visitors per month. Yahoo! Finance’s traffic mainly comes from people going directly to the site or via the mobile app, as well as those who come from links to the site within Google Search results.

No Longer Siloed

With the bulk of web traffic today coming from outside platforms, social or otherwise, the landscape for financial news consumption is shifting. Essentially, we have a hugely fragmented ecosystem where people go to get their finance news and it’s even more fragmented in how they got there. One thing’s for sure, it’s only going to get more disparate as platforms and the digital ecosystem evolve.  

Land of the Free (Trade)

What happens to competition when everything is free, when there’s no obvious financial differentiator? How do you get customers to choose you over the other guys?

With the recent bomb dropped by JPMorgan that they’d be offering free trades to everyone via their new You Invest Trade Service, brokerages are on high alert and looking  to understand how this will affect them and the market. Certainly JPMorgan is the first incumbent—but not the last—to make a serious move in this space, and while fintechs like RobinHood built their platforms on free trades, they have less overhead and less offering to contend with. In other words, the incumbent fall out is likely much more significant. But the potential is also astronomical for those who do it right.

How Will You Stand Out?

Since it appears that trading is becoming a commodity with a race to lower pricing until it’s ultimately free, the competition is going to have to create other factors in order to differentiate themselves going forward. As we’ve posted about in the past, these could include user experience and ease of use and delighting customers via good design. As well as attracting new customers. (More on that in a bit.) But there is so much more FIs can do. In fact, no financial company has leveraged the full platform like Expedia has in the travel category or Amazon in the consumer shopping space. This industry is stuck in the mid/late 90’s, whereas consumer spending platforms have evolved and changed with or even ahead of the time. Finance needs to up their game.

Here’s how we see things evolving:

Pricing is No Longer a 2-Year Study

Gone are the days where pricing used to be modelled out with firms conducting tons of research and testing before changing their fee structure. Today, FIs need to be more nimble and push out pricing changes to be immediately responsive to market changes and influences. Being able to pivot or better yet, being first out of the gate, could make or break a new pricing strategy. And leave everyone else scrambling.

Market Cap Erosion

With their announcement, JPMorgan shaved $9B off the market cap of everyone else. With the trading fee revenue stream eliminated, it impacts all companies as it relates to their valuation and market cap. So if brokerages remove trading fees, where will that “lost” revenue come from? Several incumbents have said they too could go to $0 trading, particularly in a rising interest rate environment, but why do it if you don’t have to?

RIP Legacy Systems

For most established banks and credit card companies, account conversion on legacy systems still takes place offline. This is not only slow but costly. JPMorgan has invested tens of millions to change this on-boarding process, therefore creating a solid ecosystem of digital products. JPMorgan’s ability to cross sell between Asset Management and Banking is key to their success. The Chase Mobile acts as a digital branch for customers, allowing users to make deposits, payments, keep tabs on their account, and will soon add You Invest to this digital suite. All this capability in one place sounds very familiar…

Will We See “Prime Trading”?

Stash and Acorns have proven out that customers are open to subscription based financial services, a model that Amazon Prime has pioneered in retail. And, by moving away from the fee-based model to a consumer-friendly ecosystem model, JPMorgan believes that creating a digital ecosystem will help the bank better align with clients’ interests.

“We’re very focused on delivering more service. All our analysis shows that those customers who do more than one thing with Chase will stay with us longer,” [emphasis added] says Jed Laskowitz, CEO of the bank’s You Invest service.

For example, You Invest will offer free portfolio-building tools and access to the bank’s stock research allowing customers to construct a portfolio composed of cheap ETFs and stocks. This sets up Morgan to create its own passive investment vehicles, essentially getting that fee back albeit in a way that serves the consumer and the bank. So, by offering free trades, JPMorgan could actually grow the business as customers use other services.

Remains of the Day

Time will tell what no fee means for incumbents, or if JPMorgan resorts back to a more traditional fee structure. In the meantime, one thing is for sure, and that’s that nothing is for sure. FIs are going to have to look to other industries to see how they can model a more robust and streamlined offering, tap into untapped customers and still find a way to grow their bottom line.

Incumbents vs. FinTechs: Product Offer Throwdown

Previously, we have done comparisons on mobile account opening and the design of these offerings as it relates to incumbents vs. FinTechs, so we thought it only fair to do a more detailed comparison based on product offerings and where the industry is headed. While you can call our design evaluation subjective, our side by side product and feature comparison demonstrates how the large incumbents serve a stronger set of offerings to a broader base of investors, but at the expense of simplicity. While the FinTechs have limited offering but a more honed feature set.


Pretty much everyone is working on some form of a robo, and many have already started their own. In fact, due to competition for passive investors from low fee, automated investing startups like Wealthfront and Betterment, incumbents (Schwab, Fidelity, E*TRADE, TD Ameritrade) were quick to roll out at least one automated investing account and many now offer more than one option.

While the incumbents are dominating AUM (Vanguard $112B and Schwab $33B vs. Betterment $14.5B and Wealthfront $11B), the independent robos are pushing the tech envelope. “For people who are looking for a quality, digital online experience, independent robos are a step ahead of the incumbent ones.”

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The start-ups are forcing banks and brokers to adopt technology faster than ever before, while the established players are pushing the robos to incorporate more traditional services in their products. In fact, many of the digital-only startups are layering in human advice to complement their automated offerings. This should give pause to any incumbent, or at the very least, make them rethink their features and user experience.

In a Galaxy Not Far Away: Pricing Wars

Whether it’s executing trades, managing portfolios or simply owning mutual funds and ETFs, costs have been collapsing on Wall Street. Feeling the pressure from low cost or no cost entrants like Robinhood and Tastyworks, Fidelity finally slashed trading commissions to $4.95 in February of 2017.  This quickly resulted in similar changes from the other incumbents (Schwab, E*TRADE, TD Ameritrade), and Fidelity and Vanguard have also aggressively cut fees on ETFs. Now, with J.P. Morgan offering fee-free trading and access to research and portfolio building tools to their 47M customers, it just may become the industry standard.

And while Robinhood gained attention for attracting more than 5 million users, and a $5.6 billion valuation, in just a few years, J.P. Morgan, the biggest U.S. bank, has a distinct advantage: it already has financial ties with half of American households. In other words, market share is up for grabs and while low fee or no fee might hook customers in, what will keep them needs to be more thought out than simply “free stuff.”

Tales of the Crypto

While none of the large retail brokers have added direct trading of cryptos, there have been a few interesting developments. TD Ameritrade and E*TRADE allow crypto futures to be traded on their futures trading platform and Fidelity and E*TRADE both have innovation labs exploring uses of blockchain and crypto. “It’s no secret that we are actively exploring cryptocurrencies, including Bitcoin and other digital assets in our Blockchain Incubator at Fidelity.”

For a large conservative financial firm, Fidelity was early to realize the potentially transformative impact of cryptocurrencies and blockchain technology, even allowing users to link Coinbase accounts via a web widget. But while they’ve been experimenting, other FIs have been diving in, from big traditional exchanges that offer bitcoin futures, to companies such as Square and Robinhood that allow users to trade digital coins.

Robinhood, which earlier this year added crypto trading, only offers this feature in select states. Square added crypto trading to their Cash app in late January, with Square Cash averaging 2M downloads per month, 3x the growth rate of Venmo. Coinbase surpassed Charles Schwab in the number of open accounts in late 2017 (11.7M vs. 10.6M), but the value of those accounts is still a fraction of the value of Schwab ($50B vs. $3.26T)

Not everyone is on the blockchain bandwagon. As E*TRADE’s Lance Braunstein says, “For me…it feels more like a solution waiting for tangible problems to emerge. We don’t have a dying need to use blockchain.” But as we’ve written about in previous posts, with blockchain’s ability to greatly speed up processes and reduce cost, why doesn’t everyone have a dying need to use it?

Amazon of Investing

While all of the challengers in the investing space have well-defined customer journeys and easy to use interfaces, there’s still a large difference in the breadth of the offering. Customers with specialized needs (securities lending, bonds, futures, trust capabilities, advanced options tools) will probably be better served by more established players. While customers seeking to simply capture market returns with excess cash will probably enjoy the better digital experience and onboarding provided by the newer players in retail brokerage.

What interests us is how both facets are pushing the others to be better. FinTech is pushing the incumbents to simplify, while the incumbents are pushing fintech to be more than just a pretty interface. But the question is, will anyone become the Amazon of investing? Will anyone ever have everything for everyone? And what will that look like? Time will certainly tell.


Time’s Running Out to Adopt an API Strategy

As the connective tissue linking ecosystems of technologies and organizations, APIs allow businesses to monetize data, forge profitable partnerships, and open new pathways for innovation and growth.

So why isn’t everyone using them?

Adoption of APIs

More and more APIs are being adopted across all industries—travel (Google Maps), food/entertainment (OpenTable, Spotify), communication (What’sApp, Messenger, WeChat). Companies like Button are partnering with brands to help distribute their offerings to a large developer community and that are eager to strengthen their mobile experience via the use of APIs. APIs, to these organizations, equal opportunity, and access.

In fact, companies that have moved aggressively to embrace APIs have profited handsomely. Salesforce generates nearly 50% of its annual $3 billion in revenue through APIs and for Expedia, that figure is closer to 90% of $2 billion.  And, as Professor Rahul Basole has demonstrated through infographics and a simulation, first mover advantages matter for API strategies. Just look at this graphic contrasting Amazon and Walmart.


Finance is Far Behind

However, when looking at the Finance industry, banks and brokerages are lagging behind in API adoption. Screen-scraping—which we’ve written about numerous times—doesn’t allow for reliable data connections to banks and is a huge security risk. However, screenscrapers are widely used and via the halo effect, end users are tricked into submitting their information that results in loss of control over their own data. All of that can be alleviated with the adoption of APIs which use information in a more effective and efficient way. APIs still allow data sharing but in a way that creates a safe, seamless experience for both users and creators.  

A Change, She’s A Coming

Luckily things are changing. In Europe with PSD2, APIs are becoming the new standard. The U.S. is likely a few years behind, but Asia, always an early-adopter, has already recognized the need for APIs in order to have a competitive edge. Frankly, the entire finance industry should be looking to find ways of unlocking the potential which will impact and, ultimately, provide benefits for all involved.With the objective of stimulating competition in banking, monetary authorities across Asia are looking at this themselves and starting to put in place a number of Open API directives and specifications designed to dramatically reduce barriers to entry, create opportunities for nimble and innovative players in the market, and encourage competitiveness within Asia’s banking sectors.

Open for Business

Singapore got on board early with Open Banking and their open market strategy saw DBS, a financial services group, launch the world’s largest API developer platform last November. “A platform-based approach, underpinned by an extensive ecosystem of participants that all adhere to common standards, is crucial in enabling banks to quickly access, integrate and deploy new APIs from Fintechs and developers.” In other words, it’s time for everybody to get into the sandbox and play nice.

Follow the Money

McKinsey estimates that as much as $1 trillion in total economic profit globally could be up for grabs through the redistribution of revenues across sectors within ecosystems. Even more, reason to adopt APIs which are integral in bringing together organizations and technologies in these ecosystems, creating a significant competitive advantage. One bank created a library of standardized APIs that developers could use as needed for a wide variety of data-access tasks rather than having to figure out the process each time. Doing so reduced traditional product-development IT costs by 41% and led to a 12-fold increase in new releases.

And yet, there are still just a small number of firms with fully developed API programs, making it now or never time to capitalize on this window of opportunity.  “Today, a firm without APIs that allow software programs to interact with each other is like the internet without the World Wide Web.” For FIs, even with systems that might be more antiquated than others, APIs can help

bring your processes into the 21st century, better connect you to your customers, create money-saving efficiencies and drive brand loyalty.

So the question we have to ask is, what are you waiting for?



1 Venkat Atluri, Miklos Dietz and Nicolaus Henke, “Competing in a world of sectors without borders,” McKinsey, July 2017

Can AI Drive Alpha for ETFs?

In our previous post we touched on the potential of an ETF bubble. The exponential growth of ETFs, especially from younger investors who want to set-it-and-forget-it, means there’s an opportunity for providers to increasingly use Artificial Intelligence in smart alpha and active products. But what can AI do for your business and investment strategy?

Like Humans, Only Better, Faster, Smarter

AI tools can intake data, learn from it, and act on it to meet specific objectives. But they can do it more quickly and efficiently. In fact, machines running AI algorithms can process large amounts of data in the blink of an eye. Market data is dynamic. Machines can react instantly to fluctuations to best identify ideal investment strategies. They can also read through thousands of pages of market reports in seconds, while simultaneously connecting new market signals with recent ones detected in other markets. It would take a fund manager hours to do the same thing a machine can do in split seconds.  

AI Has No Ego or Emotion

Investors tend to make poor decisions because it’s their money they could lose. Money is emotional. But machines don’t get stressed, tired, or angry. There’s no winning or losing. They operate in a purely logical manner and make decisions based only on evidence and indicators. When you remove emotion from the equation, you make better decisions. There’s no holding onto a position because you think it might change. There’s only analyzing the facts and deciding based on what is happening, not what might happen.

Disrupting the ETF Industry

ETF positions are decided on by an AI system that processes market signals, news articles, and social media posts. Daily trade recommendations in an AI capacity are not only easy, but cost-effective. Smaller fintechs and individual developers have unprecedented access to this technology. Perhaps you read about AIIQ from EquBot, the first exchange-traded fund to use AI technology to pick stocks from developed markets outside of the U.S. It leverages IBM’s Watson capabilities to build predictive models that identify 30-70 U.S. stocks every day that have the best appreciation potential.

IBM’s open APIs and developer-friendly portals charge per API call once a product is live. This sort of scalability makes AI accessible to anyone, regardless of size or motivation. And, as you can see from the below chart, ETF providers who aren’t taking advantage of AI are losing out on revenue.


All About the Alpha

Experienced traders are turning to AI in order to maximize profits in up markets and minimize risk in down markets. Because AI leverages Natural Language Processing, Sentiment Analysis, and Numerical Data Processing to analyze social sentiment with lightning speed and precision, it can maximize alpha. It takes a human three seconds to analyze a tweet, but it takes AI less than one millisecond to analyze a tweet as bullish or bearish.

Since AI doesn’t need to sleep, it can be working 24/7, even when the markets are closed, trying strategies that might be difficult to execute for traders. And because of the amount of data available, risk is mitigated because AI will know when to get out before it’s too late. An AI system can make daily stock recommendations that the ETF manager can then use to shift positions, increasing alpha.

Compete or Go Home

An important aspect of any AI strategy is partnering with external developers. Because, in order to compete with the top financial firms in your sector, you need to leverage machine learning or risk being left behind. In fact, you might already be.

Are you leveraging AI in your business? We’d love to hear about it.


Is an ETF Bubble Looming?

ETF Folklore

“From the industry perspective, what’s brilliant about ETFs are they have the ability to work well under pressure. Any time we’ve seen dips or a bear market, we’ve seen ETFs be a good haven because all you’re doing is going to a different side of a trade.” – Global Asset Manager with >$1T AUM

The appeal of ETFs to investors is diversification. The ETF surge represents a shifting investment ecosystem away from active, toward passive. According to a Charles Schwab 2017 ETF Investor Survey, the percentage of ETF investors by demographic is as follows: 56% of Millennials, 44% of Gen X and 30% of Boomers. In fact, an astounding 96% of millennials see ETFs as a necessary part of their investment strategy, perhaps because they have less money available to invest.

Screen Shot 2018-07-11 at 9.18.22 AM.png

ETFs are appealing because:

  • They have lower expense ratios
  • You can purchase fractional shares
  • They are more attractive for people with little knowledge
  • Typically there’s no minimum to invest

Crunch Time

However, many ETF investors are unaware of the risks of investing in ETFs. Some [watchdogs] see an ETF bubble that is set to burst, even though what is being invested in is more of an investment wrapper than an asset class in its own right.

Our current financial system is geared towards a much lower average life expectancy. Yet, as people live longer, their portfolios need more durability. So what is the liquidity of ETFs and the ability for ETF companies to unwind when, for example, a boomer needs to start drawing down? Or, what happens during a crunch?

Facing Liquidity

“I’m not worried about ETF liquidity. There’s always fear of that but I don’t think there’s suddenly going to be a liquidity drought in asset classes. It’s really at the very back of our heads.” – Large Pension Fund

High-frequency traders, traditional active fund managers, and other value investors believe that one of the challenges for ETF companies will be unwinding their positions. For some financial institutions that own ETF providers, exiting subscale market positions may prove to be attractive. The rapid growth of the ETF market means that we’ve seen comparatively few exits. In a consolidating market, ready buyers could be plentiful. But the challenging economics of ETFs could mean that sellers find exit valuations disappointing.

Mistaken Valuation

Cash inflows to an ETF that has large holdings of a specific company could misprice a company blindly. “In the largest products, where most of the money sits, about 90% of trading that occurs is in the secondary market, according to Vanguard’s research. That means ETF investors are passing investments between themselves, and not having to transact with fund managers.”

Another reason for concern, a July report from Cirrus Research cites that, “companies with higher ETF exposure have steadily underperformed their counterparts since last June.” While the rise of robo advisors reflects this changing paradigm, a lack of understanding drives ETF demand and introduces risks. And it shows no signs of slowing down with 61% of millennials planning to increase their ETF positions. So while wealth managers used to be too expensive for the masses, automation is changing that and ETFs are democratizing the investment world.

Screen Shot 2018-07-06 at 2.07.42 PM.png

ETFs played a role in the sell-off in 2015:

  • According to SEC, exchange-traded products experienced higher volume and volatility than standard stocks
  • Swings in price seemed arbitrary among otherwise similar ETFs
  • Many of the shares owned by investors were dealt by short sellers (unbeknownst to the investors)
  • As investors realize they own ‘synthetic’ ETF shares, the situation could explode

Before the Burst

Banks and trading firms happily sell and trade ETFs when the market is calm. When they can buy at a discount and sell at a premium, these firms will continue to offer ETFs in large quantity. But when that is no longer a probability or possibility, the suppliers of ETFs will most likely disappear, essentially undoing the entire system. But there are ways to fix the bubble.

‘Physical’ ETFs have much lower risk because they are actually hard backed by the underlying security. Diversifying with equities that aren’t usually tracked by ETFs can help avoid market cap bias.

How Close is the Burst?

Millennials are pouring their investment dollars into ETFs. They’re also the target of many of the robo advisors and FinTech’s helping investors begin to grow their wealth. Many of these robos and “set-it-and-forget-it” FinTechs are leveraging ETFs in their portfolios due to the lower price point, dollar-based investing, etc.

That said, could the potential burst or liquidity crunch be stalled due to the influx of Millennials investing in ETFs? Or is that a temporary distraction? Will the robos and FInTechs potentially suffer the same fate?

Case in point: look what happened to some of the robos that got squeezed during Brexit as people demanded access to their funds. Will this instance be a case of only time will tell, or are these brakes on their potential roller coaster?   

What do you think?




1, 2 Citibank “New Approaches to Active Management & The Need for Manufacturing        Flexibility in an Era of Asset Class & Factor Investing” 2016
3 Financial Times
4 Bloomberg

Design Smackdown – Incumbents vs FinTechs

“To design is much more than simply to assemble, to order, or even to edit: it is to add value and meaning, to illuminate, to simplify, to clarify, to modify, to dignify, to dramatize, to persuade, and perhaps even to amuse. To design is to transform prose into poetry.” –Paul Rand

We know what you might be thinking. Why is a FinTech company talking about design? Think about it. We all have products or services to offer. Shouldn’t the way we present those offerings be the cleanest, most intuitive and simplest to use? After all, the barrier to entry can take many forms and design or user-experience is certainly a big one.

It’s more than this interface is ugly and this one is clean. It’s about creating the easiest experience for the user. One that allows them to sign up in a few steps and of course then is a no-brainer for continued use. In today’s day and age, the mobile experience is paramount.

We took a look at the customer experience of several Financial incumbents and some FinTechs to see how they compared. This includes things like interface density: color, fonts, spacing, as well as more quantifiable data—steps to sign-up and log-in, overall app navigation and ease of usage.

Author’s note: In our review of incumbents and fintechs, we have attempted to assess the user interaction and experience with quantifiable data points to try to eliminate subjective opinion. If you believe that beauty is truly in the eye of the beholder, we’ve tried to focus on objective learnings vs subjective opinion.

Clutter vs. Clarity

The incumbents seem to have taken their web experience and tried to leverage those existing workflows into mobile. The screens are dense with information with a less intuitive path to entry, a plane can only land on one runway. In fact, on the sign-in screen, users are given quotes, research, accounts, trades and more. There are in some cases, 60, yes, 60(!), fields or upwards of 10 steps to complete in order to sign up. Some even suggest a 10 minutes process and then tell you it takes 2 days, yes days, to hear back. Who is going to do all that on mobile?

Screen Shot 2018-07-02 at 1.07.52 PM.png

Meanwhile, many FinTechs were mobile first, starting from the ground up, which allows them to simplify and convey the one thing they want the user to do: sign up, log in and start immediately using the tool. There is nothing distracting them from that goal and it’s literally the only thing they can do on that screen. No distractions. No extra steps. Just sign up or log in. All of these offer 12 screens (some which are inaction screens) to sign up. That’s under 5 minutes. No waiting period. Mission accomplished.

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Incumbents Still Winning…for Now:

While incumbent apps are rated well and—as of now—preferred by experienced traders or those who have broader active investing needs, this rating likely has more to do with the rich legacy features that older generations of investors rely on. In other words, rich features and lack of head-on competition from Fintech apps that aren’t competing to the same level of investors and for the same features are the reason they are being more utilized. An example of this would be a plethora of research and charting tools as found on Etrade but not on RobinHood, something an experienced, active trader leverages to make decisions.

Let’s compare:

Here how Robinhood and Etrade both show AAPL as a quote page. There are two distinct approaches being utilized and it’s clear the apps cater to two types of investors. Etrade is info-rich, providing more information for trading decisions. For a newer investor, this might be more content than is needed. But for an experienced trader, this is what they’re used to seeing.

Robinhood, on the other hand, offers a slicker and cleaner interface. Robinhood presents users with one aspect of the stock and directs them to exactly what they want them to see. For a newer investor, this is likely all they need and doesn’t overwhelm with excess complexity. 

Screen Shot 2018-07-02 at 1.12.21 PM.png

Understand the Trends

Fintech apps have mainly been focusing on a large pool of inexperienced or young investors, or those that want to take generally a passive role in the investment markets. As we mentioned, Robinhood—the only FinTech broker competing for active trading—is still lacking in basic Incumbent features such research reports and stock screeners for idea generation. However, each segment has something different to offer:


  • Audience: Experienced investors/traders
  • Sign up process: Lengthy and information-rich  
  • Ease of use: High learning curve
  • UI and UX patterns: Complex
  • Capabilities: Feature-rich


  • Audience: Young investors/traders
  • Sign up process: Straightforward and short  
  • Ease of use: Shallow learning curve
  • UI and UX patterns: Simple and modern
  • Capabilities: Limited focus

What the Future Holds

For now, FinTech apps aren’t a threat to Incumbents for serious traders. However, that doesn’t mean Incumbents should rest on their laurels and accept their outdated and clunky app experience. Given a bit more time, FinTech players could, and likely will, gain ground on new waves of investors. Since Incumbents have been really slow to adopt in focusing on the end-user through better UX, FinTechs are picking up Millennials that have grown up using Facebook, Google, Uber and other services that established high standards for their experiences. These are apps that offer low learning curves, simple entry, and minimalistic user interfaces. And they are what the people want. So, it’s only a matter of time before user experience trumps experienced.

Screen Scraping’s SODA Framework Explained


Recently, Yodlee, Quovo and Morningstar announced that they were launching a joint initiative “…to enable secure, open data access for consumers in regard to their financial data.”  They’ve created the Secure Open Data Access (SODA) framework, a set of consumer-centric principles for data access and financial data security to promote transparency, traceability, and accountability in the financial services ecosystem.

We’ve done a lot of talking lately about open data and why it’s so important for consumers and businesses. This ranges from allowing for increased innovation to the importance of APIsLet’s dissect what this announcement doesn’t say:

SODA Broken Down

“To ensure that the aggregator bread-and-butter business isn’t scuttled completely, or at the very least taxed into oblivion by the banks, aggregators are stealing a march by positioning themselves as consumer advocates.” – Drew Sievers, CEO of Trizic Inc.

1) Mention of Financial Institutions

How can you protect data or open it up without partnering with the very people who provide the customer info in the first place? What we do know about this deal is that there’s no clarity on where the data goes, no clarity on how to control users’ access from the FI side via these three companies and no comparison to PSD2. The bank’s data is what the aggregators are mishandling, either intentionally or unintentionally.

2) APIs Not Included

The three SODA aggregators don’t say that they will no longer screen scrape. They have positioned themselves to appear on the side of the consumer while stopping short of adopting more secure methods of data sharing like APIs. They also criticize the government for a lack of clarity but suspiciously stop short of advocating for new legislation that would most likely restrict their operations. “The move is partly a response to other industry proposals that the SODA framework developers see as too restrictive.”

3) Data Resale

The framework benefits a data aggregator company that makes money on selling the technology. Yodlee has taken heat on reselling anonymized data to investors and others. But they say the framework is designed to put the consumers’ needs first.

The sale of this data is one of the big areas of interest among hedge funds. Many are interested in non-traditional data sets, and consumer portfolios/activity is one of those data sets that’s viewed as interesting data to hedge funds. With all the money available for data, it’s hard to believe they are going to leave those chips on the table and walk away.

4) Plaid and Finicity

The two missing players are smaller than the others but also used widely and screen scrape the same universe of financial institutions. “SODA’s purpose is to consolidate Yodlee et al.’s position and ward off the threat of large banks stepping in and regulating the market themselves, since it is more often than not banks’ data that’s used,” says Sievers. If this is true, why not include all the aggregators? Are Plaid and Finicity being excluded for being too small? They do the same thing and use data the same way. So why were they left out? Plaid has declined to comment on this announcement citing a lack of expertise regarding Yodlee, but it does make you wonder.

Where’s the beef?

Essentially, there’s not much here. There’s no clear benefit to the investor and the protection of their data and there’s no clear benefit in terms of security.

APIs are the big missing piece in all of this and what’s really needed above and beyond these “made up” frameworks. APIs give everyone more control, allowing FIs to benefit the users and truly keep their information secure and protected.

In Europe, the Europeans believe they own their own data, but that’s not true in the US. This is the mind shift that needs to happen to give people more control of their data and in turn, their privacy. No acronyms needed.

Acct Opening – Big Spend, Little Innovation

I’m on Top of the…Sales Funnel?!

FIs spend most of their marketing dollars on account acquisition. In fact, in 2017, the US financial services industry will have spent $10.1 billion on digital advertising, a 13.1% gain from 2016, according to eMarketer. But for all this spend there’s been almost no innovation in this space. And that lack of innovation is losing customers and costing FIs millions. It’s time that FI’s begin to ask:

  • Is there a better model?
  • How can the account opening process be improved upon for an easier flow for the end user?  

In a previous post, TradeIt conducted time trials to open a new brokerage account on mobile. Completion of those applications ranged from 6 to a staggering 12 minutes. So what were the pain points and causes of abandonment?

  • Too complex
  • Too many steps
  • Took too long
  • Required information not readily available

The biggest challenge in a mobile age is that none of the account opening processes are “native to iOS” (or Android) and all require users to go to a responsive web application that’s driven from the 20-year old Affiliate link model that was designed for desktop. So, with each additional minute and extra field to complete, or with clunky mobile interfaces, the number of completed applications falls significantly. There goes your sales funnel…and your profits.

Bye, Bye, Bye

According to Forrester, 54% of people filling out financial application forms abandon prior to completion, and on top of this, a recent study by SaleCycle saw financial abandonments reach an average of 79.3%. This is a huge, wasted opportunity considering that customers who attempt to complete an application are expressing a genuine interest in your products and services. In other words, if your process is quick and easy, they will complete their sign up quickly and easily. If it’s not, then you’ve lost a customer and revenue.  

As you can see below, Acorns’ account opening flow is super streamlined, moving the user from beginning to end in an easy progression of screens with limited questions.  

Acorns Flow.png

Dollars are moving to mobile, but no one is fixing mobile  

By 2019, advertisers will spend more on mobile than all traditional media, except television, put together. Why? Because that’s where the eyeballs are. And your customers. According to Zenith, mobile ad spending for 2017 grew 34%, to $107 billion.

FIs that respond to this need and continue to ramp up their already heavy investment in both the online and mobile channels will be better positioned to drive incremental sales, build customer loyalty, and provide an outstanding customer experience.

Innovate to Acquire

Meeting long-term customer acquisition goals for an FI requires identifying and capturing market opportunities while staying ahead of the competition. In a world of specialized products for highly segmented target audiences, being able to launch a new bank customer acquisition program faster than the competition means getting the largest part of the market share. For every month of delay, some of your customer base moves to another product with a competitor. That lost revenue over time accumulates and creates a revenue gap that will never be filled.

At the Benzinga Global FinTech Awards last week, the big brokers spoke about the need for innovation. TD Ameritrade cited:

  • 40% of their trading is happening on mobile  
  • They are doing 250,000 trades/day

The brokers on the panel—which included TD Ameritrade, Schwab, Interactive Brokers and TradeStation—agreed that constant innovation was a necessity in an age when retail brokers interfaces are being compared to Amazon and Google for being clean, easy and intuitive. As we highlighted in a post last year, 72% of millennials would rather bank with Google, Facebook or Amazon than their existing financial institution. The mobile experience is key to this and easy interfaces are what will get them to visit and stick around.

Quick and Easy

What Robinhood, Acorns, and Stash get right with their native/mobile-enabled tools is to allow users to open an account in under 5 minutes. Why? Because those tools were built from the ground up with mobile—and the end user—in mind. They know what’s important when looking at customer acquisition and creating that experience:

  • Hone: Get the message right
  • Streamline the process: avoid pitfalls that will cause potential clients to abandon the flow
  • Focus: Only include the must-have know-your-customer components
  • Make it native: If you do one thing and one thing only, make it native

Friction Isn’t Fiction

Everyone working in fintech should know that reducing friction at key transactional points in your user journey is critical for adoption, conversion and repeat long-term use. Just remember that your users don’t necessarily understand the ins and outs of why the financial industry has to do some of the things it does. So while they expect it to be complex and difficult, those who can make it easy and fast will surely win the acquisition game in the long run.  


Screen-Scraping and the Halo Effect

Don’t Believe Everything You See

“Trust is a key strategic asset which creates growth opportunities and defends against competition. It allows deeper customer engagement across products and services.” – Nobel Prize winner, Robert C. Merton

We’re going to talk about screen-scraping again. Because we think it’s so important to be aware of what this means for both consumers and FI’s. You can get more background on the process of screen-scraping and what it means for the future of banking as well as the importance of API’s and innovation in our previous posts here, here and here.

One of the ways screen-scrapers are getting access to customer data is through a halo effect.

This is the foundation of the modern concept of brands. Essentially it means that when we develop a favorable impression of a brand when interacting with one partner at a firm we tend to view the whole firm in a favorable light. Our impression of that firm’s brand is strengthened. Thus creating a halo around that entire firm that is associating with the other brand.  

Screen-scrapers are using logos to build trust and credibility and then turning around and selling the data they’ve so trustfully obtained. By using the logos and trademarks from financial institutions, it engenders trust among the end users who associate the brand of Broker X with their money and the security that their financial institution provides. However, most FIs have not in fact granted permission or rights to the screen-scraper for them to use the logos in the first place. The trust of the logo makes an association for the end user, but this is an abuse of the institution’s mark and negatively impacts the end user and the institution itself.

The Anti Trust

Let’s be honest, most Americans aren’t enamored with big banks or financial institutions these days. However, seeing a logo of a familiar name in one of their finance apps will undoubtedly create a feeling of assurance that things are on the up and up; that their information is safe. As an end user, we’re putting our faith and trust in the visual association of the broker or bank brand on a third party site. And in this case, that trust is unfounded.

I Didn’t Sign Up for This

When this logo appears, it signals to the end user a perception of the financial institution’s endorsement of the technology, thus they willingly link their account. As we’ve argued in previous posts, the screen-scraper can then go in and grab their data — any of their data — and use it and sell it. These companies are selling that data many times over, charging their partners per linked user. But where’s the end user’s cut of the profit? And how many places are they selling it to?  

Millions of Customers + 1000s of Companies = Millions of Screens Scraped and Countless Data Points Up for Grabs

Screen Shot 2018-05-04 at 2.52.29 PM.pngAn Ounce of Prevention

Luckily, all is not lost. Companies like Fidelity and Ally are ensuring their information is secure and are increasingly moving towards APIs for third parties to access their clients’ data. In fact, TradeIt’s SDK specifically helps partners integrate our technology, allowing their developers to integrate faster with simple customizations. This ensures the end user that they’re protected and gives them total control over what happens to their data. By partnering with brokers to access their APIs, TradeIt only accesses the information that the broker makes available.

Here’s how it works:

  • Through a broker’s API, we allow the end user to log into their brokerage account securely.
  • We don’t view, access or retain their log-in credentials.
  • After the user consents, the broker provides an encrypted token.
  • This token will expire, and once it does, the connection is severed.
  • In order to continue to view their portfolio and/or send buy or sell orders from their favorite app to their broker, the end user will need to relink their account.

Safety First

How this differs from traditional screen-scraping is simple: we don’t retain log-in credentials and continue to access and scrape the end user’s data however we see fit. Their information is not available to us. Nor should it be. Not only is this safer in the event of a data breach, it provides true trust with the end user. We only show the logos of brokers with their permission.

Many Financial Institutions are requiring aggregators to sign agreements where the aggregator/screen-scraper is liable for the data in the event of a breach. Not surprisingly, many aggregators are pushing back and not signing these agreements (ostensibly because it cuts off their revenue stream).  

But, as we move into more transparency around banking, brokers are embracing this change. TradeIt has consent pages and end-user agreements that explicitly inform the investor that we’re accessing their data on their behalf. It’s more than just a logo, its an agreement between the broker and the third party. This puts the end user at the forefront, not on the backburner. Which is where they should be in the first place. After all, it’s their information.

In the Question of Data Control, APIs are the Answer

Abracadabra, Watch Your Data Disappear

Whoever said ignorance is bliss obviously never unknowingly shared all their data. As we mentioned in a previous post, consumer data is being screen-scraped into the ether and this creates so many issues around control and the assumption of privacy. Once your data is scraped, it’s gone. Neither the bank or institution, nor the end user has any control.

The problem, as ever with the tech industry’s teeny-weeny greyscaled legalise, is that the people it refers to as “users” aren’t genuinely consenting to having their information sucked into the cloud for goodness knows what. Because they haven’t been given a clear picture of what agreeing to share their data will really mean.

Miss Jackson if You’re Nasty

It’s all a question of control. And APIs are the answer. They offer banks and FIs the ability to control what pieces of data and how much are grabbed by a permitted 3rd party. For example, at TradeIt—from some of our brokers’ API—we see only seven days of transaction history, while others might show 30 days. Typically no one provides more than 90 days but the depth of history varies. In addition, for things like an order blotter, some brokers only provide the current days’ orders. These smaller pieces of data ensure less is shared, though what is shared is timely and relevant.

You Get My Data and You Get My Data, Everybody Gets My Data

With screen-scraping, once you provide your ID and password to the 3rd party, their bots do the scraping and can grab anything that’s available, including your transaction history and all of your accounts under that single login. For some banks or brokers—if the broker is part of a larger financial institution that offers a diverse product set—that could be your brokerage account, retirement account, mortgage, even credit card information. Most end users likely don’t realize that once they give the screen-scraper their login, they have it, and they can and will use it until the password is changed. What’s worse most of the screen scrapers don’t have trademark rights to the logos that are on their service integrations, therefore falsely leading the consumer to believe the institution approves it. In the meantime, they’ve still grabbed that data and it’s gone…to who knows where.

APIs Create a Goldilocks Solution, They’re Just Right

In contrast, most APIs are programmed to call for specific account balances since these services and endpoints are more distinct and inherently control more access to just the needed data. This is why the European Banking Federation’s position is that screen-scraping is an outdated, first-generation technology that should be replaced by APIs, which it sees as a more secure way of enabling direct access to customer data for third parties.

Not only do APIs offer a more tailored solution where you essentially get only what you need, they create a huge potential for innovation. As we demonstrated in a previous post about your data being open for business, companies like Fidelity are already showing consumers who has access to their data and allowing them to control whether or not that’s ok with them.


In Tech We Trust

Brokers need to push themselves to invest in APIs. Ever since the invention of the FDIC, FIs have been associated with trust as it relates to consumer’s money. The theory with bank robbery was that they aren’t hurting anyone since the money is insured. Except now with screen-scraping, we are getting hurt…with our privacy…or lack thereof.

As technology evolves and allows for endless possibilities, investing in methods to engender trust and yet that also support the new ways individuals want to interact with their money, track their wealth and/or use tools for better financial decisions, is vital. Brokers and FIs need to enable that, to securely open their data with controls to prevent misuse or even breaches. This is what will create real trust with their users.

Don’t Build a Wall

Firewalls and detours aren’t the answer. It’s not about closing things off, it’s about opening them up. With the new sharing ecosystem, and with millennials having more trust and more interest in tech-driven brands, FIs need to work to remain relevant. In order to do this, you need to be an active member of the ecosystem and invest in technology that supports these behaviors.

Because, while users may be content to share some of their personal info in order to use your service now, it’s only a matter of time before they realize just how much and possibly decide it’s not worth it.

“We have consistently warned our customers about privacy issues, which will become increasingly critical for all industries as consumers realize the severity of the problem.” – Jamie Dimon

Are they really getting what they signed up for, or worse, paid for? You need to provide comfort and control to your user. If you don’t, they won’t tick that agreement box and they’ll move on to someone who can.  

The Evolution of Value Chain and Porter’s 5 Forces

Millions of eager MBAs populate the executive suites and boardrooms of top companies around the globe, and the vast majority were indoctrinated in strategy classes with Michael Porter’s Five Forces and value chain analysis. These value chains have served corporations as they examine vertical integrations, mergers & acquisitions and the strategic fit of business lines since the Industrial Revolution.

Screen Shot 2018-04-11 at 8.59.39 AM.pngExample: Linear value-chain which offers one direction for business flow only.

This traditional model is no longer useful or practical and the technology revolution of the last 30 years is forcing companies to re-evaluate linear value chain analysis in favor of a “constellation” approach to building businesses.
Untitled123.pngExample: Constellation approach using TradeIt to showcase the potential of a living breathing value ecosystem that flows to all entities.

As we see in the TradeIt model, the relationship between buyers and suppliers now features a “big bang” view of the ecosystem—partners that support each other and need each other to grow, branching off in every direction.

So why is this beneficial?

The TradeIt model would not be possible without APIs. APIs allow companies to securely work with each other through technical channels in order to focus, build and scale without the same linear approach as historically conceived. But we’re getting ahead of ourselves. First, a refresher…

Five Forces

First described by Michael Porter in his classic 1979 Harvard Business Review article, Porter’s insights started a revolution in the strategy field. A Five Forces analysis can help companies assess industry attractiveness, how trends will affect industry competition, which industries a company should compete in—and how companies can position themselves for success.

Essentially Porter built a framework for understanding competitive forces in an industry and how those drive economic value among the industry players. Today we’re still trying to understand how to drive value, but what’s clear is that it’s no longer through a linear value chain. Instead, we drive value through a platform model where you have contributors owning different pieces, therefore making the sum of the parts greater.

Evolution of the Value Chain

“The value chain describes the full range of activities that firms and workers do to bring a product from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer.” Nowhere does it say the chain has to be linear.

Enter the API

APIs are revolutionizing traditional business alliances and partnerships through scalability, flexibility, and fluidity.1

When companies share APIs, the world expands. Uber relies on Braintree for payments, Google integrates Uber into its map feature, and the list of interdependent API-driven technology businesses becomes more and more apparent.

Similar to the relationships between Uber, Google and Braintree—which are all focused on delivering a service to an end user—in finance, Cross River Bank allows companies like Affirm, TransferWise, and others to be free to build client-facing tools and services without having to do the core banking functions that often slow large incumbents. The ‘big bang’ approach to an ecosystem allows innovative service providers to enter a space with one “killer app” or a new tactic to solve a pain point.

Power in Partnerships

Large incumbents, where all the technology and related services are all under one roof, may not be able to move as quickly due to silos, legacy systems and/or risk and compliance requirements. The keys to this new value chain approach and the ecosystem are the partnerships and the ability to work together in new and innovative ways to meet the end user’s needs.

The visual below shows how TradeIt acts as a hub between supply and demand (brokers vs publishers) and how other partners come into the equation with ancillary and related services.

Screen Shot 2018-04-11 at 9.03.19 AM.png

This type of model not only offers much more flexibility for other players, it also opens the door for additional revenue streams and increased profitability. By creating value at every touchpoint, from broker to publisher and supplier to distributor, the ecosystem will only continue to expand and grow…to the benefit of everyone.   

1Bala Iyer and Mohan Subramaniam, “Corporate Alliances Matter Less Thanks to APIs,” Harvard Business Review, June 8, 2015.

How Open Banking Can Result in More Innovation

Playing Safety Catch-Up

As we outlined in our last post about the practice of screen scraping, in order to protect user’s data, it’s extremely important that financial institutions start moving towards APIs. With the PSD2 initiative, officially the Revised Payment Security Directive, Europe is ahead of US in terms of best financial institution security and consumer privacy practices. And if the recent Facebook/Cambridge Analytica scandal is any indication, it’s more likely that the US will see a data protection movement similar to what we’re seeing in Europe.

The question isn’t if PSD2 will be adapted in the US, but rather when? Before we try to answer this question let’s take a closer look at what PSD2 actually includes.

What is PSD2?

At its core, PSD2 or Open Banking is about protecting consumers. It enables bank customers to use third-party providers to manage their finances. Banks are obligated to provide third-party providers access to their customers’ accounts through open APIs enabling them to build financial services on top of banks’ data and infrastructure. This places an emphasis on consent via security, innovation, and market competition.

Third-party providers can be either Account Information Service Providers (AISP’s) or Payment Initiation Service Providers (PISP’s).

  • AISP’s provide users with aggregated information about their payment accounts in a single location, such as transaction history, account balances, direct debits etc.
  • PISP’s facilitate the use of payments via online banking with regards to online fund transfers, direct debits, credit cards transactions, etc. This is a game-changer when it comes to avoiding credit card fees and other transaction costs.

By enabling fintechs, large technology firms, other banks, and even certain retail organizations to go head-to-head with banks as PSPs, PSD2 aims to provide lower costs and higher security for consumers and to afford merchants greater flexibility to differentiate customer experiences, including payments.

APIs give the financial institutions the ability to manage security and control compliance risks while at the same time giving users access, control and visibility into how their data is being used—a win/win.

Control Begets Innovation

Giving consumers control of their data and who has access to it opens the door for new innovation and new partnerships where security and compliance are givens. PSD2 creates opportunities for banks to compete as technology innovators, wielding powerful analytical tools to extract valuable insights from their vast stores of proprietary data. And market dynamics and customer attitudes may favor banks that can capture opportunities quickly and effectively. In fact, 35% of banker’s surveyed said in the payments arena, FinTechs were the most likely to benefit from the implementation of PSD2.

There are countless other services FinTech companies could provide if they had access to customer transaction information. Currently, most banks cooperate with data requests, but they can be slow to respond or sometimes block them entirely. PSD2 will make it compulsory to both share the data and build systems capable of making this trade real-time. A massive win for consumers and businesses.

So When Will PSD2 Come to the US?

There’s no timeline right now, but there are several factors that could compel this directive to happen in the US sooner than later: requirement of screen scraping companies, FinTechs and FIs to release known data breaches; a regulatory push; another Equifax breach; a consumer-driven movement; or even FIs finally having good personal finance management capabilities.

Smart companies will start preparing so the minute we have our own Open Banking, they’re ready. Or better yet, start acting like PSD2 is already here. That means:

  • Building and opening up APIs to allow your customers to have control
  • Thinking about how you can innovate once restrictions are lifted
  • Understanding the control APIs provide for consumers and why this is a benefit
  • Learning how Open Banking can save you and your customers both time and money   

Creating more transparency and providing consumers with more control over who can access their data is a great thing for investors and an even better opportunity for innovation. How will you capitalize?  


1 McKinsey Global Payments Practice PSD2 Survey 2017

Your Data: Open for Business

Giving Control

Despite all the talk about big brother-like tactics, Twitter, LinkedIn, and Facebook (the Cambridge Analytica scandal, notwithstanding—but we’ll get to that in a bit) actually provide their users with a significant amount of control. Users can set their privacy and access settings for data downloads, block people, enable and disable logins, as well as receive alerts when they log in from other devices.

Taking Control

Considering how much personal consumer information they have, financial institutions have nothing comparable. In fact, they’re being screen-scraped by everyone from Mint to their own credit card marketing teams. And what’s worse, users may or may not know this. There’s no warning message or communication from the banks to their customers and if there is something, it’s probably buried in the Terms of Service of the scraper itself. Banks have no visibility into the data sharing practices or downstream uses and they have zero ability to turn-off these authentications on the banks’ site.


So while you can choose to block a high school sweetheart or de-link your Facebook account from Tinder, once you set up an auto-payment with Stash to Bank of America, BofA has no control on where the data is going, how the data is used or when the data is accessed. It’s a lose-lose for the banks and consumers.

Open Banking

APIs are the only way to address the issue. The US is already behind Europe’s PSD2 (Second Payment Services Directive) Initiative which creates Open Banking, allowing brokers to open up data via API, providing a secure and compliant means for data transfer. This change provides greater control and limits the potential misuse of screen-scraped data. That’s why the emphasis on control and compliant access is a foundational principle of TradeIt’s platform, providing connectivity to brokers and financial institutions.

After what recently came out with regards to Facebook and Cambridge Analytica, 50 million people just got a big wake-up call when it comes to how their information is being used and disseminated. It’s likely only a matter of time before Open Banking comes to our friendly shores and once it does, everyone’s going to have to play nice in the banking sandbox.

Where’s Jamie Dimon when we need him?

Before this happens, the smart US financial institutions will need to build the APIs and control centers and start educating consumers on the risks associated with scraping and gaining control of their data. In fact, some, like Fidelity, are already doing that. Their new Fidelity AccessSM product allows consumers to see which third parties the consumer has permitted to access their data. Consumers can even go one step further to disable a token that’s in place, thereby removing the connectivity and the third party’s access to the investor’s data.


Under Lock and Key

Privacy and controlled access are a mantra for Financial Institutions and people expect security, especially with the increasing numbers of hacks and data breaches. Now more than ever, providing users with control over who has access to their data is vital. Financial Institutions need to jump on the bandwagon with features that control their customers’ data. And FinTechs who partner with them need to push for APIs with secure and compliant access that allows customers to control that data. Open Banking should spur innovation, not deter it, but it needs to be done with security and compliance at the forefront. After all, they are the tenets of our industry.  

Blockchain’s Impact on the Finance Industry, Part 3

This is part 3 of our multi-part series on the blockchain. In parts 1 and 2 we talked about the specific effects of blockchain and cryptocurrency on the finance industry as well as how it will impact asset management and investing. Today we are diving into payments and banking.

You Get a Currency and You Get a Currency

While many banks are skeptical of bitcoin, none are skeptical of blockchain. But the marriage of the two is where it gets dicey. Because while central banks are looking into issuing digital currency, the biggest banks think the technology isn’t evolved enough to handle the world’s biggest payment systems.

Case in point: while Bank of America won’t allow their customers to trade bitcoin futures, the company itself has received at least 43 patents for Blockchain, the most of any other payment firm. Why? Because the slow processing of cross-border payments is one of the areas most commonly identified as ripe for blockchain-based innovation. And everyone wants to jump on the bandwagon.

“…in a world where you can stream video from the space station, but you can’t move your own money from point A to point B…how do we take advantage of technology available today to dramatically accelerate the nature of how transactions and payments happen?” – Brad Garlinghouse, CEO, Ripple

Right now capital is sitting in pre-funded accounts all around the world. When you decide to work with someone, you transfer your currency and they transfer theirs. But what if you didn’t have to pre-fund those accounts? Ripple wants to disrupt this model with sub second cross-border payments and automated best pricing from its network. Since Ripple payments are nearly instant, their model removes credit and liquidity risk from the process, thus lowering bank (and societal) costs considerably.

Ripple sees an opportunity to make payments faster and cheaper by connecting different ledgers and thereby creating a universal protocol and solving the multi-trillion liquidity problem. And they’re not alone.

Feeling the Need for Speed

Payment providers getting into the blockchain space have the distinct benefit of doing the fund transfers so they can funnel users’ funds into purchases of the underlying currencies or to accounts at exchanges. This allows for significantly lower settlement time and lower costs for both providers, thereby lowering costs for the end user.

Mastercard is testing the technology to facilitate payments between businesses.

But, it’s not just about sending cryptocurrency payments. IBM is looking into platforms that allow blockchain payments of mainstream fiat currencies instantly, cutting down on the time it takes to set up and send wire transfers. And making it cheaper.

And IBM has started numerous pilots in this area. From their collaboration with startup Stellar, which uses blockchain technology to connect flat currencies to enable instant international transfers, to New Zealand-based payments company, KlickEx, they are hard on the heels of several blockchain endeavors.

What’s Next for Blockchain?
As we wrap up this series, one thing is for sure, Blockchain is going to have a huge impact on Fintech and that impact will likely change almost daily as the technology develops and gets more widely adopted. According to Goldman Sachs research, companies that switch to digital could see $57B in net cost savings globally each year. In other words, the financial profit and time-saving applications are enough of a game-changer to make all this fluctuation in the space worth it in the long run.

Blockchain’s Impact on the Finance Industry, Part 2

This is part 2 of our multi-part series on blockchain. Catch up on part 1 here.

A lot of industries and areas are being disrupted by blockchain technology. We took a deeper dive to see how the new technology specifically affects Asset Management & Investing.

Mo’ Money, Mo’ Margins

Blockchain’s effect on asset management and investing firms will be significant in terms of cost reduction and improved margins. According to Accenture, the new technology could save the banks up to $12B every year. This “provides a rare concrete estimate of blockchain’s potential savings.” Because blockchain data is essentially tamper-proof, it simplifies the supply chain process, removing the need for reconciliation and potentially making it easier for auditing. Additionally, by removing the ‘middle-man’, compliance costs could be reduced by up to 50%. Blockchain-based solutions can streamline processes and cut costs by greatly improving upon the traditionally fragmented data quality most bank database systems currently use.

“The technology represents a potentially important breakthrough at a time when leading investment banks are looking at myriad ways to rebuild their returns on equity.” Chris Blain, Partner,  McLagan

Follow the Money

Because there is so much money to potentially be saved in the long-run, investment in blockchain technology is soaring. An estimated $75 million was invested in blockchain efforts specific to capital markets in 2015, up from $30 million in 2014. By 2019, that figure is expected to reach a whopping $400 million.

This list might be endless, but with what we know now, blockchain can be used to generate savings by:

The bottom line for all of this is the huge potential of significant cost savings, faster transactions, and more accurate data and reporting.

As we stated in Part 1 of this series, there are many unknowns and it’s early days for this evolving technology. As we dig into the asset management use case, we see that the potential cost savings are significant. But, how we get there and what new solutions might drive us there are still unclear. Stay tuned as we share use case scenarios for payments and banking in our next post in this series.

TradeIt’s Bot is Live on Facebook Messenger

We are excited to announce the launch of the TradeIt Bot, live on Facebook Messenger. The new bot allows investors to securely link to their brokerage accounts to view account balances, receive alerts, such as end of day market roundups on the performance of their positions. The bot also provides pricing data for the equities and crypto markets. Giving investors greater control and sense of security, TradeIt securely links investors to their accounts via brokers’ APIs; we do not screen scrape the data.

IMG_7462         IMG_7460           IMG_7461.PNG

“Our partners have reported increased engagement when leveraging TradeIt. When an end user simply sets up a watchlist, retention increases 5x over a 3 or 6-month timeframe.  With a portfolio linked via TradeIt’s technology, partners reported 10x and 12x increases in retention for 3 and 6-month timeframes, respectively,” Nathan Richardson, CEO, and co-founder, noted.  “We expect with the large volume of users on Facebook’s Messenger Bot and high retention numbers reported among our partners, TradeIt can support investors with real-time portfolio data and account balances.”  

In November 2017, Facebook reported continued growth and adoption for the Messenger app by hitting 103.5 million MAU in USA.  Global adoption was 1.3 billion MAU globally.  As we explored in our summer series on FANGs, Facebook laid out plans to embed business services into the Messenger platform, in line with WeChat’s strategy.  Ordering an uber, booking a reservation, shopping for new clothes, and with TradeIt’s Messenger Bot, now, monitoring your investment platform and track market prices for equities and crypto.  

With Messenger’s numbers increasing and Facebook’s stated strategy to follow cues from WeChat, looking to Tencent is likely a sign of what’s coming to the US markets.  Tencent, WeChat’s parent company, has received a license that allows it to sell mutual funds on WeChat and give the popular messaging app’s 980 million users.  Coupling the mutual fund license with the licenses to operate mobile payments, insurance and micro-financing on the WeChat messenger platform, the market is seeing… and validating the need… new avenues for individuals to manage their wealth and pursue the business of their lives.  

The TradeIt Bot for Facebook Messenger can be integrated for a single broker on their Facebook page, giving our brokerage partners an easy way to enter the Messenger space and provide access to their investors where their investors are active and engaged.  Also if you head over to the TradeIt homepage you can see the bot experience embedded on the page.  Over time, we expect the bot to support additional parts of the customer journey, specifically account opening.  For more information, please contact us at support@trade.it or check out the bot here.

Blockchain’s Impact on the Finance Industry, Part 1

This is part 1 of our multi-part series on Digital Assets and Blockchain, and what these could mean for the finance industry.

It seems like you can’t take one step these days without bumping into someone talking about cryptocurrencies. But for all this talk, the average investor probably doesn’t understand the underlying tech behind it — which is the real value add — the blockchain.

Developed in 2009 as the technology behind cryptocurrency, blockchain is a vast, globally distributed ledger capable of recording anything of value. Assets can be moved and stored privately, securely and from peer to peer. For the first time in human history, two or more parties can forge agreements and make transactions without relying on intermediaries to verify their identities or perform the critical business tasks that are foundational to all forms of commerce.

So let’s ask ourselves, How will blockchain affect the finance industry? There are a lot of unknowns, both potentially negative and positive. Let’s start with the potential positives:


It’s estimated that consumers could save up to $16 billion in banking and insurance fees each year through blockchain-based applications. By reducing transaction costs and essentially cutting out the middleman, blockchain offers an efficiency that cuts through costly financial ‘red tape’. And with shorter clearance or settlement times, reduced back office and compliance costs, companies could also see similar savings as well as risk reduction.

Streamlined Processes

A large majority of financial securities exist today purely electronically and are managed centrally through trusted third parties, incurring considerable operating costs. Blockchain supports the validation and execution of transactions in near real time. This means it can be used to:

  • Remove friction from the client onboarding process
  • Streamline management of model portfolios
  • Speed the clearing and settlement of trades
  • Ease compliance burdens

Data Integrity of the Audit Trail

Like most forms of technology, blockchain in accounting and audit greatly reduces the potential for errors when reconciling complex and disparate information from multiple sources. One reason is you can’t alter a record once it’s been committed under blockchain, even if you own the record. And because every transaction is recorded and verified, the integrity of the transaction is guaranteed. Plus with the advent of smart contracts, trade is enabled with fewer barriers and protected via the digital wallets on either side of the transaction.

But with any new technology there are always potential negatives or concerns:


In June, IBM was selected to build a blockchain-based international trading system for seven of the world’s biggest banks, including Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit. And, Microsoft and Bank of America Merrill Lynch have teamed up on a new project using blockchain in trade finance, aiming to create a framework that could eventually be sold to other businesses. However, just because companies want to start implementing it, doesn’t mean your customers are going to jump on board, especially when it concerns their money.


While Blockchain is tantalizing to FinTech, with nearly all blockchain-based proofs of concept developed by banks having been undertaken in conjunction with fintech partners, new territory could mean the wild wild west when it comes to oversight.

“Blockchain and cryptocurrencies aren’t regulated as a technology generally speaking. It depends on the application. So, whatever they’re used for, it’ll fall under the appropriate regulator — and sometimes the inappropriate regulator.” – Marco Santori, Cooley


Like any endeavor, how you scale could mean the difference between profit and bankruptcy. Blockchain networks still aren’t capable of handling the high transaction volumes that could rival that of large industries and financial institutions. Without the appropriate scaling solutions, transaction costs would be too high and the wait times too long for viable adoption. For example, Bitcoin blockchains can only achieve 3-4 transactions per second compared to 56,000 for Visa’s VisaNet. Plus, when you add to this the fact that more than half of the world’s big corporations are considering blockchain and 2/3 of them expect the technology to be integrated into their systems by the end of 2018, proper scaling becomes even more vital.

The one thing we can be certain of about blockchain is that we don’t know what impact this technology will have and how many industries it will affect. Even with all the excitement surrounding it and its entrance into the mainstream, it’s still in the early days. Smart investors and tech titans will tread lightly and keep a watchful eye on this continually and quickly evolving space.

Stay tuned for the next post in this series on what blockchain and cryptocurrencies mean specifically for asset management and investing vs. payments and banking.

TradeIt’s Developer Portal is Live, Supporting Ecosystem Expansion

In TradeIt’s ongoing efforts to support FinTechs, financial institutions and app developers, we are excited to launch our Developer Portal, available at developers.trade.it. The new site is designed for our partners looking to access our SDK or API and to begin integrating our platform into their apps for end users.  

Once registered for the site, a developer will be issued a key to our staging environment. For developers who already have a key to the TradeIt API, they can link their key to an account and leverage the portal for information. The site includes a hub for documentation and integration guides, including dummy accounts for deeper testing of one’s integration.  Users will be able to request production access as they prepare for deployment and reference broker details.  

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Future upgrades and additional functionality to the Developer Portal will include broker profiles, deployment checklist to help developer prep for production release, analytics, community threads, and support.  We believe the new developer portal is one more tool to help expand the ecosystem and help support our partners.

To sign up for the developer portal, click here.  For additional questions, comments or feature requests, please contact us at support@trade.it.

The Changing Model of Advertising

When was the last time you clicked on a display ad? Scratch that. When was the last time you even noticed a display ad? Chances are it’s pretty slim. We’ve grown accustomed to ignoring static messaging that distracts us from what we want to see or engage with. With a quick click of the X, it’s ad-be-gone. But, all of that is changing and you might not even realize it.

Get Them In The Moment

Transactional advertising is on its way to becoming the new normal. And rightly so. Because distributing content and/or an experience in an ad is the key to engaging with the user. They’re looking for your ad to be relevant to them and allow them to take immediate action.   

Content + APIs = ads that become content that educates, informs, and enables decisions in real-time. In this way the message is not lost, the brand is not forgotten, and the user instantly gets what they want. A win-win.


And yet, money is still being spent on the traditional model. A lot of money. In the first half of 2017, digital advertising revenue in the U.S. grew 23% to $40 billion. Mobile advertising made up over half (54%) of that figure, while digital video was the fastest-growing format. Even though the market is there and people are spending, no one is happy with how effective it is. Think about it, when was the last time you were directed to open an account for something you were already invested in? Not to mention that for lower funnel tactics like engagements and acquisition, mobile has been a tough play.

We should no longer think of the internet as mobile vs desktop. Advertisers are simply following consumers, who live their lives online—whether on a smartphone during a commute, on a desktop at work, or on a tablet for entertainment in the evening. Digital is an intrinsic part of every American’s day.” — David Silverman, Partner, PwC

With better targeting of active traders, messaging can be specific to them. In other words, you can send offers to trade commission-free to your existing clients vs. sending offers to open an account to investors who trade with your competitors.

These online advertising revenues remain concentrated with the 10 leading ad-selling companies, accounting for 75% of total revenues in Q2 2017. This likely includes powerhouses Facebook and Google (although the IAB report doesn’t break out individual business revenue).

The question you need to ask is, how are you going to partner with them to make advertising returns even more effective for them…and for you?

How do you drive transactions within the ad?

How do you increase transactional effectiveness?

You “Give people actions, not ads.”

Give The People What They Want

Just like apps such as LIKEtoKNOW.it allow users to shop outfits with a simple screenshot, people who check their investment portfolios or research stocks should be able to shop those stocks and buy them while doing it. TradeIt supports advertisers in exactly this way, by providing the ability to link an account, open an account and fund an account, providing the means to take action where the individual is inspired. Because once they leave the app or experience, you’ve likely lost your chance to convert.

“I’m a big believer in the power of educating people at the moment of decision making. You might have read an article from Fortune or Forbes about some strategy but you probably don’t remember that when you’re actually taking the action. Bringing [it] together is where the real power exists.” – Noah Kerner, CEO of Acorns

Take a look at your spend. If your KPI is getting accounts funded, don’t put your ad in front of people where they can’t fund it. Put it in the space where they can take initiative and make a purchase.

Just as the user experience should be about getting them to the path of completion in the easiest, smoothest and most delightful way, your ad needs to do the same. Get the right information in front of the consumer so they can make an informed decision and act!

Product Announcement: New SDK Screens for Transactions

Expanding investors’ visibility to their brokerage accounts

We’re excited to announce that we’ve launched new transactions screens to our SDK to support our core products, PortfolioView and TradingTicket.  These new screens provide investors with great visibility into their accounts.   

Users will now be able to view their transactions… trades, deposits, dividends, interest, etc.  The new screens for transactions will be accessible via PortfolioView, where the end user can select from the activity menu in the upper right corner.  These new screens can be stand-alone screens as well if you have built your own portfolio tools, similar to how partners can integrate the order history screens.

We’re thrilled to extend this new feature and hope your app users will benefit from it!

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For more information about the new screens, check out the documentation here.

Email support@trade.it for more details or with any questions.  

Product Announcement: New SDK Screens for Orders

Greater visibility for investors looking to manage their brokerage accounts

We’re excited to announce that we’ve expanded our core products, PortfolioView and TradingTicket, to now include order details as part of the SDK screens.  

End users will now have great visibility into the details of their brokerage accounts and their trades. The new screens provide an easy view of all orders an investor has active – open and pending orders, partially filled orders and orders filled that day. A simple swipe down will refresh the screen and with an easy swipe to the left, users can cancel an open order. The new screens can be accessed from the PortfolioView or TradingTicket.

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For more information about the new screens, check out the documentation here.

Email support@trade.it for more details or with any questions.

2018: The Year Ahead in FinTech

2017 was quite a year for FinTech. So, as we head into 2018, what can we expect to see? Here are a few things we’re keeping our eye on:

Infrastructure and Enabling Becomes Focus in the $640bn Tech Space

While a lot of investment lies in front user-facing technology, no one has really invested in building the new technology, enabling or infrastructure that incumbents can use. This will result in incumbents biting the bullet to release themselves from massive legacy systems and moving their platforms to cloud-like services. Legacy tech providers are going to be forced to reckon with a consultative model that doesn’t allow for incumbents to advance. And incumbents will focus on creating flexible and light, yet secure, value chains that don’t wed them to one platform or cost base.

How This is Playing Out

  • Cross River and n26 become examples of flexible, cloud-based plug & play platforms.
  • Due to client demand, FIS, IBM, and CA began cutting consultants and investing in scalable enabling technologies available in the cloud.
  • nCino demonstrates how banks can use a cloud-based platform for a service that’s accessible via Salesforce, a growing ecosystem player.

Talent Race and Shift

The labor market for finance and FinTech is going to become increasingly confusing to incumbents. On one hand, they’ll need to maintain legacy systems with tenured staff, while in order to compete they’ll need to shift to pro-developer workforces across functions. And as many top-ranked engineers start to head west, the east coast finance companies and FinTech companies will need creative solutions to attract and retain fresh talent.

“Millennials…know how to upgrade your complicated infrastructure from Fortran to Ruby, how blockchain applies to your business model and how to save money on market data. Millennials can also streamline your interbank APIs and get your whole platform on the cloud. It’s a brave new world, and it’s not getting any slower.”

Unbundling and Frenemies

Imagine a world where Vanguard opens accounts, enables funding via Venmo and allows for proxy voting within the Yahoo! Finance app. This year that scenario is more likely. Asset managers will get closer and closer to the end customer, bypassing traditional sales channels. And the top asset managers will unleash components of their algorithms to allow for distributed Robos that direct consumers into their low/no fee ETF products.

Competition will put increased downward pressure on trading fees and force financial institutions to release more components of their customer journey into user experiences. And the competitive unbundling will push marketing teams to abandon the traditional conversion funnel expectations for immediate transactional activity and results.


As Financial Institutions shift from legacy systems to cloud-based services, the race to build financial technology ecosystems will accelerate. As demonstrated by Dr. Rahul Basole, in his work with visual analytics of ecosystems, it’s clear that speed to market, depth of developers and available number of APIs will drive successful outcomes in business moving forward.  

As the traditional linear value chain is disrupted in favor of plug & play ecosystems, financial institutions will need to move quickly to modularize components to be available in as many ecosystems as possible, while at the same time making their core service offerings essential for others to plug their APIs into their platforms. While this may seem confusing and like a brave new world, Professor Basole’s work on APIs and the battleground between Amazon and Walmart is illustrative of the potential pitfalls and benefits.  

Potential M&A Opportunities

  • One of the big three challenger Robos (Betterment/Wealthfront/Personal Capital) will be bought by an incumbent looking to play catch-up with Vanguard and Schwab’s momentum. 90% Confidence
  • Ant and WeChat will make plays for a US FinTech company in either the money transfer space or payments space in addition to the repeated push to gobble up MoneyGram. 90% Confidence
  • PayPal buys a PFM platform targeting millennials that gives them hooks into the full spectrum of millennial finances. Bold move possibility: PayPal buys SoFi. 75% Confidence.
  • Broker Consolidation, TD buys RobinHood. 50% Confidence
  • Wisdom Tree gets bought by a Passive Fund Management Firm. 50% Confidence
  • Amazon will be the first mover to buy a FinTech platform that allows financial institutions to put their customer journey in the Amazon experience: Alexa, Echo or Amazon Wallet. 75% Confidence
  • Amazon launches their own cryptocurrency for customers, vendors and the entire supply chain rather than partnering with an existing platform. 50% Confidence  
  • State Farm Insurance makes a bold $Bn play for Lemonade. 50% Confidence
  • JP Morgan, Citi or Goldman Sachs buys a Square and/or Stripe. 50% Confidence

What are your big predictions for 2018?

2017 Year in Review

As this year comes to a close, we’re taking a moment to reflect on the biggest fintech happenings of 2017. Allow us to refresh your memory…

Scope and Scale…or Fail

In order to scale, you need scope and in order to have scope, you need scale. It’s the classic chicken and egg strategic scenario. We’ve seen how scale and scope can help, but on their own, they’re a three-legged stool. Technical innovation is the missing leg to complement them for true success. So the question for both incumbent and new entrant financial institutions is: How can you gain scope and scale? Learn from these failures and successes…

Unbundlings: Disrupting the Disruptors  

Will Asset Managers move closer to customer relationships as they race to acquire more assets? We looked at some of the behavioral shifts in digital and customer expectations and found that consumer attention is increasingly tricky and even more expensive to get. In order to create stickiness, financial Institutions need to start using latent technology, data, and other signals to surface the component of their customer journey at the right time (and the technology and messaging platforms need to be able to deliver). Find out how in this three-part post…

The Importance of Understanding the Psychographics of your Consumer  

The psychographics of consumers — their activities, interests, and opinions — are the underexploited levers that could drive Finance Companies and Financial Apps. In order to create stickiness and build a relationship, we found that companies need to focus on what the customer feels — not who they are. Be wary of throwing stuff at a user and distracting them from why they came to your site in the first place — lean into your strength. Learn how to use psychographics to your advantage…

FAANGS In Finance

Earlier this year we documented the upside opportunity for Google, Facebook, and Amazon to build financial services products, following in the footsteps of their Chinese counterparts Baidu, Tencent, and Alibaba. We also explored the potential of Financial Institutions bringing their customer journey into the FAANGs experience. Learn more about how you can — and should — use these FAANGS to your benefit…

What’s Next for the Robo-Advisor?

First championed by venture-backed startups, the robo-advisor was quickly replicated by incumbent firms. Today, the startups in the space are seeing declining growth rates, while competing with the incumbents they once threatened. To achieve staying power as stand-alone companies, the next generation of wealth management startups will need to invest heavily in cutting-edge technology, not clever marketing. Find out Where Robo-Advisors Went Wrong…

Stay tuned for our look ahead to 2018…

Unbundlings: Disrupting the Disruptors – Part 3

This is part 3 of our 3-part series on “unbundlings”. Read parts 1 and 2 now.

The Great “X-factor” of AI

Artificial Intelligence is still in its infancy. As experts note, there’s a dearth of roughly 4,000 true experts nationwide on AI and the majority work at Google, Facebook, Amazon, and Apple—with the margin being lured into Goldman or Quant Funds. Even more insightful is recent news that Microsoft is significantly cutting sales people in favor of “developer activists.” Could this mean AI is closer than we think? One thing we do know is that AI improves results by applying methods derived from aspects of Human Intelligence at a beyond human scale.

So, while there’s a growing “alt-data” movement in the FinTech world, very few retail firms have tapped into the potential to make both the consumers and their own bottom lines stronger. And if history is any indicator, waiting for the Big Four to define the space will only mean you’ve missed the boat by the time it happens. It’s important to get off the sidelines, onto the field and join the team.

Future’s So Bright

AI Start-ups saw record funding last year. While it would be beyond us to predict the future of how AI is going to unbundle investment firms to unleash the power of their products and features, it’s the investment firms who have the customer data, relationships, and future retirement in the palm of their hands. And it’s those firms that can capitalize the most on reframing the customer connection and using AI data to have a better understanding of their needs. FinTech companies need to use these assets to partner with the Big Four and create partnerships that marry these two.

Starting Point Tips

  • If privacy, compliance or security (PCS) are concerns, address these items by partnering with approved vendors and make these “qualifying criteria” for partnership.
  • Inform the Big Four that after PCS, your goal is to grow your customer relationship, resulting in more money for both your customer and your company.
  • Identify key champions at the Big Four who can help you to shift your advertising budget into a transactional budget that’s measured on engagement on these platforms.

The Future Waits for No One

The question is not if but:

  • How fast these “unbundlings” will come
  • Who’s best prepared to benefit from these events
  • Who will fail in the process

Where will your organization land?

Watch later this week for our Year in Review and next week for our Year Ahead.

Announcing: Digital currencies now supported via TradeIt through integration with Coinbase

We’re pleased to announce that we’ve connected our core product — Portfolio View — to Coinbase, a digital currency exchange with more than 10 million users and more than $50 billion in trading activity in digital currencies such as Bitcoin, Ethereum, and Litecoin.

“With our TradeIt partnership, Coinbase users will now have the ability to view their digital currency holdings on web portals such as Yahoo! Finance.  As digital currency trading volumes build and trading becomes more mainstream, partners like TradeIt and Yahoo help provide easy access to retail investors, anywhere and anytime.” said Sam Rosenblum, Director of Global Business Development at Coinbase.

TradeIt enables our partners – developers, publishers, social networks – to easily add digital currencies via integration with our SDK.  With this expanded support of digital currencies, Yahoo! Finance has gone live with our Portfolio View SDK.  Yahoo! Finance users will now be able to link to their Coinbase account and monitor their positions in Bitcoin, Ethereum, and Litecoin.


TradeIt’s platform is designed to support your platform and your end users in their financial journey.  TradeIt supports equities, ETFs, options, FX and digital currencies.  Enabling our partners to quickly and easily integrate additional asset classes that end users are looking for drives our product roadmap.

“We are excited to be expanding our coverage of securities and adding digital currency support to our core products,” said Nathan Richardson, co-founder and CEO of TradeIt.  “Supporting our partners with easy to integrate solutions for their apps is key to our efforts in enabling developers and publishers to meet the needs of their end users.”

Unbundlings: Disrupting the Disruptors – Part 2

This is part 2 of our 3-part series on “unbundlings”. Read Part 1 here.

You Get an API and You Get an API. Everybody Gets an API.

Picture this: You’re a consumer. At your fingertips you can view rebalancing, set it and forget it, algorithmic products, monitoring, alerts, coverage calls, portfolio analysis, performance, fractional buying and other products—all via your favorite apps. That’s the world we’re headed towards. Already you see companies like Wells Fargo have a “Gateway” of plug & play APIs, and BlackRock offering their own “hackathon”. Both inviting developers to have “financial data sets at your fingertips”. Keeping your products closed is the quickest way to close your doors.


Use What You Have

In reality, most investment firms have the products and tools to do what the FinTech companies are doing, they just need to be re-packaged and exposed. BlackRock, the world’s largest Asset Manager, added more assets in the last quarter than the entire FinTech space has under total assets. BlackRock also has a powerful set of APIs that could easily be distributed onto a retail platform like StockTracker to allow their users to rebalance or set up an auto-algorithmic portfolio tool and allow them to pick any broker-dealer. It’s only a matter of time before this happens…and it will.  

Prepare for the Outcome

  • Ensure you have an API for each tool that you view as high value on your platform, such as rebalancing, auto-investing, sweeps, funding, etc.  
  • Spend less time worrying about building a Robo to compete with Wealthfront and spend more time putting your Robo into an SDK that can be put in front of consumers where they want it.
  • Partner with Asset Managers to understand the tools at their disposal to grow assets and understand their differentiators (e.g., are they a low cost provider like Vanguard or wed to an advisor network with the associated costs?).
  • Build an API Storefront of the high value items that your company believes will drive your business forward.
    • If your company’s primary goal is AUM, expose an account transfer and account funding API
    • If your company makes 40% from options, expose your Options API

Don’t expect the customers to come to you—put your best product(s) in front of them without friction.

Unbundlings: Disrupting the Disruptors – Part 1

In our previous post, we posed the question of whether or not Asset Managers would move closer to customer relationships as they race to acquire more assets. [And, as we go to press and will cover in our next post, RIABIZ News reported that BlackRock is indeed getting closer to retail customers.] The questions and feedback we received inspired us to say a bit more about what we mean of these “unbundlings”. But first, we need to restate some of the behavioral shifts in digital and customer expectations. What follows is part 1 of that exploration…  

The Customer Journey – They Want It Now

Today more than ever, consumer attention is increasingly tricky and even more expensive to get. Given AI and the other predictive technologies available, if you’re lucky enough to garner consumer interest, you should (and need to) be able to communicate the action that’s on their mind. Otherwise, you’ve lost them. In order to create stickiness, financial Institutions need to start using latent technology, data, and other signals to surface the component of their customer journey at the right time (and the technology and messaging platforms need to be able to deliver).

Increase Reasons for Intentional Engagement vs. Nagging-based Fear Engagement   

Account opening, funding, rebalancing, monitoring and closing occur not only at different life stages & life events, but at different times of day, in different locations, and for 500+ other different reasons. We’re already seeing “set it and forget it” apps use native advertising to target consumer acquisition by leveraging these 500+ other data points, but why not put the action you’re writing about right in front of the consumer? Remember, consumer psychographics play a huge role in site visits and retention. Give them what they came for.

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You’re In or You’re Out

Apple, WeChat, and WhatsApp allow you to make payments natively in their app. If you’re a broker/deal or investing firm, now’s the time to get a seat at the table with your product. The question is not if but when these mega platforms will offer what you do — with or without you. Not only have we revealed our take on them…

Looking to China: What Facebook and Snapchat can learn from WeChat  

Apple Pay Cash launches in beta today, letting you send and receive cash in Messages

Facebook Messenger beats WhatsApp and Apple with clever new payment feature

Prepare for the Outcome

  1. Build your technology: If you have a mobile app you already have the APIs, the question is whether you can turn each piece of the customer journey into a component to be surfaced for each activity.
  2. Build your components: Include your differentiators – brand, price, legacy or some other USP. If you believe in your differentiators, there’s no reason to fear putting your components in front of your customer.
  3. Monitor the landscape: Use the resulting benchmarks (a product /feature comparison and time trial) as a set of goals for your team. For instance, if the top online account opening product takes three minutes to complete, how do you beat that, given that time to completion is a known point of friction to new customer acquisition?  
  4. Collaborate and push the platforms: If you’re spending marketing dollars on a platform, you should be asking them to enable transactions/actions to occur natively on these platforms rather than risk losing the customer in the old model of CTR.  

In part 2 we’ll cover the tools you need to deliver on the promise of everything-at-their-fingertips as well as why an open API could be the difference between your company’s life or death.


Chasing Zero

If you’ve ever visited a financial news site, you’ve likely been bombarded with offers for “Free Trades” or “Lowest Costs per Trade”. Since the earlier days of the online brokerage industry, the competition for the lowest cost per trade has been fierce. So fierce that the two largest and grandest in the space, Fidelity, and Schwab, launched the latest fee war earlier this year which we wrote about.

You may also be aware that Robinhood, a venture-backed unicorn, is now offering “free trading” and even putting an interstitial in your log-in flow to entice you to move your assets from other brokers to them. What gives?

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Mo’ Money, Mo’ Profits

While Robinhood makes money by selling customer order flow, the largest financial institutions make money having Assets Under Management (AUM.) The more money that they have under management, the more money they make. And it appears that investors have turned the screws on Robinhood to make more money given their aggressive (ab)use of competitor’s Trademarks & Logos (as seen above) to shift assets to the free brokerage.

The chart below shows just how much a brokerage can make when they have more assets under management—which is tied to where interest rates lie. In a zero interest environment, which we were between 2008-2016, it’s harder to put AUM to work, but once interest rates rise, those with the most assets win—which is why you see the financials of top public brokerages recording record profits despite lower trading volume.  

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No More Soft Sell

Traditionally brokerages do not aggressively push customers to move their assets from one account to another. In fact, Fidelity was the only brokerage to not charge or put a financial disincentive to do so. However, as Robinhood has taken Trump-like tactics to the brokerage industry, we suggest the only way to beat them is to “hit them back 10x as hard.”

Here are a few examples of how to do that:

Broker Full Transfer Out Fee Partial Transfer Out Fee Account Closing Fee Transfer Reimbursement and Other Offers
E*TRADE $60 $25 $0 None
Fidelity $0 $0 $50 IRAs Up to $100 fee reimbursement with $25,000 account transfer
OptionsHouse $50 $0 $0 Up to $100 fee reimbursement with $3,000 account transfer
Schwab $50 $25 $0 None
Scottrade $75 $75 $0 Up to $100 fee reimbursement with $10,000 account transfer
TD Ameritrade $75 $0 $0 Reimburse any ‘reasonable’ fee but would not provide minimum account balance nor maximum fee
Ally Invest $50 $0 $50 IRAs Switch to Ally and get up to $150 in transfer fees reimbursed.Requires $2,500 account transfer and excludes IRA


Rising Rates

Look at E*Trade, for example. ETFC had a 20% drop in their largest income generator of “interest income” and close to a 40% drop after the interest rate drop post 2008. Yikes! Their interest income earned has remained flat until the last year when for the 9 months ending 2017, they saw a 24% increase in interest income due to increased interest rates.

While the biggest driver or other income (which is still only ¼ as much as the interest income) is fees from derivatives (read: options), trading for equities is flat across the board but derivative products are increasingly important accounting for 34-50% of the volume.

In other words, with interest rates set to keep rising, companies can’t take their foot off the gas when it comes to increasing AUM. How do you plan to bring in more in the coming months and years? And moreover, what is your retention strategy once you have them? Is the race for AUM the beginning of consolidation? Or do you think that the AUM race will accelerate asset managers getting that much closer to retail customers?

Why the US Consumer Loses with Loose Change

The antiquated US Financial regulatory framework continues to undermine technical innovation and hold consumers back from making the most of their money. And most of them don’t even realize it.  

As far back as the late 90s, the US Regulatory frameworks for banking services in technology have yielded to the pressure of lobbyists and incumbents rather than evolving to meet changing industry dynamics, customer opportunities and increasingly global marginalization in tech innovation. While the OCC FinTech Charter is a starting point, legislators and regulators should be aggressively pushing for initiatives to enable competitive technical stacks.  

Capitalism by Any Other Name

In the 1900s, companies like BMW, GE, GM, VW, Target, Goldman Sachs and Toyota were granted a creative means of undertaking banking activities by creating an Industrial Loan Corp License in select states. In some instances, the banking activities of these companies were more valuable than the bankrupt core business, as was the case with Conseco. However, there have been no hearings or approved ILCs that would receive FDIC insurance in almost a decade.

Walmart and Home Depot are still in a holding pattern, yet Target and GM were approved— begging the question of why and what’s the criteria for consideration? In fact, the Independent Community Bankers of America has stressed that Congress should close the ILC loophole, stating it not only threatens the financial system but creates an uneven playing field for community banks, allowing them to play on their relationships to essentially pillage customers.

And, to add insult to injury, over the past two decades, the collective assets of these ILCs have increased by more than 5,000% and some of them are now among the largest financial institutions in the country.  

Finding a Loophole

We’re watching as fintech Titans, Affirm and SoFi, are applying for Industrial Loan Licenses, whereas other fintech companies, TransferWise and Coinbase, have created “clever” workarounds by partnering with innovative community banks like Cross RiverBank of New Jersey. PayPal, the largest and oldest fintech company with over $13BN in customers’ loose change has been plagued by the FDIC question since its earliest days. Now, as they continue expanding with lending via SWIFT Financial, you wonder when PayPal will start returning money to their customers rather than taking it from them.

Loose Change Infographic.pngOutsourcing Innovation

When a communist country like China, whose PayPal equivalent Ant financial, nets users an annual return of close to 5% versus PayPal’s 0% on funds left in your account, you know something’s gotta give. But the current regulatory frameworks don’t really lend to PayPal making that change anytime soon. And if it doesn’t benefit them, why would they do it of their own volition? When you stack Ant Financial’s Yu’E Bao product—which essentially translates to “Loose Treasure”—and that has 325 Million customers with $1.14TN in assets earning about 5% annually, and you compare it to Paypal’s 179 Million customers with $13BN earning nothing, you wonder what’s broken in the US system.

It’s Time to Put Change Back in America’s Pocket

If they aren’t already, Senator Warren and the CFPB should be looking overseas to see how to put money in consumers pockets, not keep the companies that people prefer from being insured, monitored and innovating. In the end, regulations need to help support and drive innovation so we all win, whether that’s through ILCs or sharing the “loose change”.


Scope and Scale…or fail

No-Limit Thinking

  • Amazon began as an online bookseller and now sells everything including cloud software.
  • CVS—“Your Neighborhood Drugstore”—sells groceries and make-up.
  • Modern day financial companies like Square Capital have expanded from payment processing into lending, food delivery and more.  

What’s clear from these companies is that in order to scale, you need scope and in order to have scope, you need scale. It’s the classic chicken and egg strategic scenario. So the question for both incumbent and new entrant financial institutions is: How will you gain scope and scale?  

Epic Failure

The classic example of catastrophic failure is Sandy Weill’s merger of Citibank and Travelers, which resulted in what some called a zombie bank.

“Mr. Weill’s watershed deal is regarded by some as one of the worst mergers of all time.”

And while Weill might have been a visionary in his grand vision of a globe-spanning financial supermarket, he failed to take into account both scale and scope, essentially combining two businesses into the Titanic of financial institutions. The result has been a shedding of business lines, shrinking geographies and the elimination of tens of thousands of jobs. Citi went from a dominant #1 to merely a top 5 bank in the US.

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1 https://www.sec.gov/Archives/edgar/data/831001/000083100117000038/c-12312016x10k.htm

2 https://www.sec.gov/Archives/edgar/data/831001/000083100117000038/c-12312016x10k.htm

Stunning Success

On the flip side, Schwab, Fidelity, and Vanguard are scaling with aplomb, crushing a nascent monoline Robo Advisory sector by introducing Robo Solutions for their customers, advisors and technology partners. Not only does this severely cut costs, it potentially offers higher net returns for investors and eliminates the complexity of a direct relationship with a human financial advisor.  

Infographic Vanguard growth.pngVanguard Personal Advisor Services hit $65 billion in managed assets as of March 31, up $15 billion from the previous quarter or $5 billion a month

They added 2x what Betterment has ($9Bn) in total in just one quarter.

Fidelity’s new RIA platform already reaches more than SigFig ($70 million AUM).

It took 15 months for Charles Schwab & Co. Inc.’s robo-advisor to reach $8.2 billion. Now, in just nine months, the robo’s assets have nearly doubled that amount and it’s on pace to hit $30Bn of AUM by 2018.

But the AUM of Vanguard’s Personal Advisor Services, at the end of the first half of 2017 was $83 billion, more than four times the AUM of Schwab Intelligent Portfolios, and almost five times the assets at inception in March 2015.

Who’s next?

Several entrants have claimed to be the financial supermarkets of the future. SoFi was one but with the departure of their CEO—who left in disgrace and may have been their best hope at being a Bezos of Finance—that seems unlikely.

Betterment and Wealthfront have the war chests to pivot and expand their business scope but scaling may prove trickier and more timely than investors have the appetite to accommodate.

N26 represents a variant of the supermarket by allowing other financial products to compete for their mobile app customers via an API marketplace. Scaled properly, they have the potential to replace the end-to-end ego of traditional banking with an adaptable tech platform for changing times.


Scale matters. It allows for price leverage, operational efficiencies, and brand development.

Scope matters. Choose your scope carefully. Unlike Citi, Fidelity, Vanguard and Schwab didn’t expand into new business lines, they drove innovation in their product lines, took ownership of their value chain and evolved the parts of their business requiring disruption.

Amazonization. Becoming the global financial supermarket may sound like a Sandy Weill dream, but the realization is that mingling assets and liabilities, conflicting regulatory bodies and cross-selling take time and innovation. We’ve seen how scale and scope can help, but on their own, they’re a three-legged stool. Technical innovation is the missing leg to complement them for true success.

The Importance of Understanding the Psychographics of your Consumer – Part II

Last week we touched on the importance of psychographics vs. demographics when it comes to targeting and knowing your audience. This week, we’re highlighting the importance of design and user experience in creating stickiness and limiting barriers to entry.

How can you use behavior when it comes to your site or app experience? In other words, what are the visuals, words, and features that reinforce psychographic “clues” to help a user get or stay engaged if you want to serve both?

Color plays an important role in psychographics and making people feel good.

Think about a politician’s red power tie or why a blue bedroom is so soothing for sleep. And yet how many banking sites think about color when creating their look and feel? An app and site like Mint uses light and fun colors as well as space to literally make people feel like they can breathe when they see the home page. It’s clean, simple and dare we say—fun.

Screen Shot 2017-10-05 at 9.01.01 AM.pngCompare that to a banking site like Bank of America. It’s cluttered, adding more stress to someone already on the edge about their finances. And the color does nothing to soothe an anxious investor. In fact, it just looks like everything else out there. It’s cookie cutter. And in today’s market, you can’t afford to be mundane.

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It’s not what you say, it’s how you say it.

Your mother was right about this. Words play a huge role in making people feel welcome and comfortable. Let’s look at the home pages of sites like Lending Tree and Bankrate.

Screen Shot 2017-10-05 at 9.12.14 AM  Screen Shot 2017-10-05 at 9.12.04 AM

Both simply have rate comparisons above the fold. Nothing welcoming. Nothing suggesting a comfort and simplicity for the visitor. Nothing offering help. (Let’s not even talk about the awful colors and design of Lending Tree.)

Contrast these with Robinhood and Betterment.

Screen Shot 2017-10-05 at 9.16.06 AM.pngScreen Shot 2017-10-05 at 9.16.34 AM.png

Both instantly try to reassure the visitor. They let them know their sites are different. They want to help. Plus, look at how airy they are. The sites aren’t congested and the colors are clean and soothing, not harsh.

Keep it simple stupid.

For most of us in the industry, finance is easy. But, for most consumers, it’s overwhelming and difficult. Make them feel like you understand that and make your site as easy to use as possible. Create tools, like the ability to import their portfolio. Yahoo! Finance was an early master of this and now uses TradeIt to allow users to sync their brokerage portfolios in order to buy and sell stocks without leaving the app. This encourages people to come back repeatedly to look at their net worth. It’s the stickiest thing you can do and it becomes a daily habit, creating daily visits.

Think of it this way: You have one runway to land a plane. If you put the terminals in front of the runway, the plane crashes. In other words, help people know where to go by directing them around your site. Show them the runway and watch them become a frequent flyer of your site.


The Importance of Understanding the Psychographics of your Consumer

What’s more emotional than money?

The worry over never having enough.

The concern about securing a loan.

The nerve-wracking nausea of watching stocks plummet.

The terror in receiving a call from a debt collector.

All too often those of us in the finance world forget this and treat money simply as our trade. But to the consumer, money can and does dictate their mood, their security, and their ultimate happiness. The psychographics of your consumers — their activities, interests, and opinions — are the underexploited levers that could drive Finance Companies and Financial Apps…and they’re staring us straight in the face.

Demographics vs. Psychographics

Most of us focus on the former when creating our sites, our apps, and our marketing plans. We want to target men 35-54 for example or women 25-45 who run a household with small children. But we really should be focusing on what the customer feels — not who they are. In other words, their behavior.

  • Are they concerned about money?
  • Are they a first-time investor?
  • What keeps them up at night?
  • What will make them come back daily to our site or app?

People like looking at their assets, not their liabilities.

If you want people to visit often, you can’t bombard them with a potential negative when they sign on. So if they’re instantly confronted with their credit score upon login, they’re likely not to come back anytime soon, especially if they don’t like that number.

And while some liabilities are only tied to life changes (e.g., applying for a mortgage), others are more pressing, like monthly bills to pay (e.g., credit cards, loans).

Simply look at the frequency with which people visit an investing site versus a personal finance site. In this example, it’s more than double.

Screen Shot 2017-09-29 at 8.53.37 AM.png

Who wouldn’t want to see a growing number rather than a potential deficit? But it goes beyond simply showing them only the ‘good stuff.’ Obviously, that’s not real life.

Create an overall positive user experience.

Of course, we all want to do this and we think we are. But take a look at your home page and ask yourself ‘what are the barriers to entry?’

If you’re a company with personal finance management tools or assets and liabilities, lead with assets as a daily habit. Get your customers to come back and feel good about their long-term growth but be sure to schedule and educate on liabilities so you don’t scare people away. You can also think of this as the infamous “sandwich” method: say something positive, then point out a criticism, then end with something positive. We’re not saying you can’t ever show someone their deficit or liabilities, just do it in a way they’re receptive to. And in a way that could create change and daily action.

If you’re in the business of assets’ investing, own it. In other words, don’t throw other stuff at a user and distract them from why they came in the first place — lean into your strength. That’s what they came for.


FinTech Roundup: Summer 2017

As August comes to a close, we’re taking a moment to reflect on the biggest fintech happenings of the summer. If you spent the last 12 weeks at the beach, here’s what you missed in the fintech world:

Tech Titans Pose a New Threat to FI’s

While startups continue to innovate in consumer finance, financial institutions should look to stay ahead by plugging into incumbent tech platforms, leveraging Google, Facebook, and Amazon as a front-door to acquire and engage customers. To understand the unique opportunities for today’s largest financial institutions, see our FAANGs in Finance series.

Bitcoin Rally Endures the Split

bitcoin-and-ethereum-sitting-on-a-tree@2xThe price of Bitcoin is up 119% since May, to $4,700. In August, the currency split into two: Bitcoin and Bitcoin Cash. Skeptics warned the split would undermine public confidence in the technology and kill its price rally. One month after the split, that concern hasn’t materialized.

FinTech Funding Is Hot

Venture Capitalists continued pouring money into fintech companies, and 2017 is expected to be a record funding year. Here are some of the largest rounds announced over the summer:

Coinbase: cryptocurrency wallet. Series D: $100M

Betterment: automated investing. Series E: $70M

Stash: investing for millennials. Series C: $40M

Kabbage: lending technology. Series F: $250M

Personal Capital: financial advice. Series E: $40M

Wealthsimple: Canadian robo-advisor. Series B: $37M

FAANGs in Finance, Pt. 5: The Compliance Barrier

Over the past month, we documented the upside opportunity for Google, Facebook, and Amazon to build financial services products, following in the footsteps of their Chinese counterparts Baidu, Tencent and Alibaba. This week, we highlight the three biggest roadblocks we see for these companies to become vertically-integrated players versus platforms– Regulation, Compliance and Culture.


Can you imagine Google drug testing their 75,000 employees?

Banking and payment is largely regulated by the OCC which has an extensive list of types, there are a few alternatives for banking regulation such as a Thrift. Investing is largely regulated by the SEC, while lending, real estate and insurance are regulated on a state by state basis. Outside of the application time, review process and process/procedures required to be in place– the decision to be regulated requires careful consideration. All aspects of employee behavior, conduct as well as business practices become subject to regulatory audit.


Can you imagine the CFO telling analysts that Facebook’s new bank will have a 5% cost of compliance?
Bank Compliance Costs.png

Banks spend billions of dollars a year on compliance and risk control staff. While banks’ overall headcounts have shrunk considerably since 2007, compliance spending has more than doubled. This trend shows no signs of slowing down, with costs around risk and compliance expected to double again by 2022.

For the largest banks, compliance represents 3% of non-interest expenses. For smaller banks with less assets, compliance takes up close to 9% of costs. Even if Google, Facebook and Amazon build technology to automate most compliance and legal processes, they will still need to hire a couple thousand compliance officers, a huge hit to their bottom line.


For tech companies, the dollar cost of becoming a bank is nothing compared to the drag on their fast-moving culture and product development. These companies are already viciously competing to build the best messaging platforms, cloud storage, and digital advertising, to name a few. Becoming a regulated financial institution would put a speed limit on many of these projects, and suffocate their culture of asking for forgiveness rather than permission.

Lessons from FinTechs

Many of the most successful fintech startups reached critical mass without becoming financial institutions: think PayPal or Square. Acquiring a banking license takes at least 2 years, and these firms got a head start by avoiding it all together. Last year, British fintech Mondo opted to become a full-fledged bank, a transition that required them to raise an additional £20 million in funding.

While the OCC proposed a “fintech charter” that would streamline this process for growing startups, state governments sued, making slow, expensive banking licenses the only option for the foreseeable future. It’s no wonder most tech companies are opting out.

The Platform Path

While a financial license might be too much of a drag on their culture, we see an alternative path for Google, Facebook, and Amazon finance: the platform play. By building financial products that are compatible with today’s leading financial institutions, tech titans can capture the additional screen time of personal finance, without slowing down their agile, user-focused culture.

Previously in this series:

FAANGs in Finance Pt. 4: Facebook

FAANGs in Finance Pt. 3: Google

FAANGs in Finance Pt. 2: Amazon

FAANGs in Finance: Joining the Customer Journey

FAANGs in Finance Pt. 4: Facebook

Facebook’s closest Chinese counterpart is WeChat – a social network that acts more like a complete operating system than a single-purpose mobile app. Previously, we outlined three paths for Amazon to go into financial services, and how their business mirrors Chinese behemoth Alibaba. This week, we look at parallels between Facebook and China’s WeChat, extracting a few predictions for how Facebook’s product suite can enter finance.


WeChat is China’s dominant social networking platform, owned by TenCent. While it’s available for download worldwide, it has a vast set of functionalities inside China, acting more like an operating system than a single-use app. In China, its 800 million users can split a bill, book a cab, send cards, shop, and even manage their finances without navigating outside of WeChat’s app. For WeChat, these integrations boost in-app engagement, pull in revenue from service providers, and allow them to build financial products without becoming regulated.

There is a digital rat race to build the “WeChat of the West.” With Messenger, WhatsApp, and Instagram in its product suite, Facebook is currently the front-runner. Each of these products has its own set of advantages for Facebook to integrate financial services. Here are our thoughts on the potential of each:


Facebook acquired WhatsApp, and its 450 million users, in 2014 for $19 Bn. Founded and built by a Ukrainian immigrant, WhatsApp became hugely popular as a cost-effective way to communicate with people overseas and evade pesky SMS charges. Since waiving the app’s traditional subscription fee, $1 per year, Mark Zuckerberg has yet to monetize its huge user base, but that is likely to change soon.

With an international user base, WhatsApp is the logical platform for Facebook to test cross-border payments. It is already pushing to launch P2P payments in India, seeking to replicate WeChat’s success in Asia’s second-largest market. If P2P payments on WeChat succeeds, it will pave the way to add more value-add services into the app, like personal finance tracking.

FB Messenger:


At Facebook’s annual developer conference this year, the it-girl was not their social network, but their Messenger app. Facebook laid out their plans to embed business services into the platform, directly in line with WeChat’s strategy. Now you can order an Uber, book a reservation, or shop for new clothes, all within Messenger.

At the same time, Messenger has shown an appetite for P2P payments, and a propensity to help businesses boost their AI capabilities. These two strategies position Messenger as an ideal platform for financial institutions to integrate with. By creating new touch points in an app their clients visit daily, financial institutions can stay relevant to their daily lives and entertain them with custom, behavior-based offers.


Facebook is most likely to embed financial services in its core platform – Facebook. While people flock to Twitter and Snapchat to share live, sporadic updates, they still use Facebook to log the most important updates in their lives: having a baby, getting a new job, or relocating to a new city.

All of this data can help financial firms gain a deeper understanding of their clients lives, and tailor their messaging and marketing appropriately. From graduating high-school to becoming a grandparent, we share much more information with Facebook than we do with our bank. Integrating financial services onto Facebook can help banks avoid the “tone-deafness” that can irritate customers, and connect with clients on a personal level. With an older and more established user base, Facebook is an ideal platform for financial institutions to integrate financial planning and 529 products.

How far is Facebook Finance?

Unlike Amazon, Facebook’s patent applications (425 in the past year alone) have shown no clear intent to become a financial services provider. However, they have shown strong interest in integrating these services from third parties, most recently by acquiring an e-money license for the EU. Additionally, they’ve poached David Marcus, a PayPal executive, to serve as a VP of Messaging Products.

If Facebook Finance plays out in line with these early moves, it will create an opportunity for financial institutions to use the platform as their front-door. This will allow them to lean on Facebook for the front-end product, client insights, and AI capabilities, without causing it to be regulated. In return, Facebook will be rewarded by the boost in screen-time and engagement from its users. A win for both parties involved.

The ‘Belief Profile’ Opportunity

As the investing population skews towards millennials, socially conscious investing is outgrowing its past as a niche market. To capture the loyalty of tomorrow’s investors, financial institutions should think beyond risk profiles by constructing portfolios based on their clients’ beliefs.

Investors often design their portfolio around a “risk profile,” generated by their age, income, acceptable level of volatility and long-term goals. Thinking back to microeconomics, we know that individuals get different, though ambiguous, levels of utility from the different choices they make. For a growing number of investors, returns are important, but so is having a portfolio that lines up with their beliefs. For example, if I care deeply about the environment, and my wealth manager allocates half of my portfolio to a coal company, I won’t be happy, no matter how big a return I get. If we expand this concept to all of the broad ethical concerns one can have, it follows logically that personal interests and beliefs ought to be given more consideration when determining a proper portfolio. While today’s “socially responsible” investing is quite niche, and still focused on environmental sustainability, it’s becoming more customary for investors to buy what they believe in.


As wealth management fintech firms evolve, a client’s ‘belief profile’ will take an equal seat next to his or her risk profile (Stash, imaged above, is a great example of this). While a risk profile is essentially confined to a scale from risk averse to risk hungry, a belief profile is multidimensional, using clients’ stances on as many issues as they choose to weigh in on. A client’s ‘belief profile’ could consider environmental concerns, foreign policy, gender, and even religion, enabling one’s portfolio to more closely reflect oneself. With an estimated 84% of the millennial generation interested in sustainable investing, the more accurately a manager can construct a portfolio that resonates with an investor’s beliefs, the more assets they can expect to pull in. This is precisely why giants like Blackrock and Goldman Sachs have started to offer more sustainability-concerned mutual funds and ETFs in the past few years.


Sustainable funds are certainly not a new concept. Take Calvert, which was founded in 1976 and launched the first socially responsible mutual fund. Calvert’s fund excluded companies that did business in apartheid-era South Africa. Today, Calvert offers 26 different funds. What’s sparking the reinvigorated interest in this space seems to be a combination of Millennials’ belief-driven preferences being given more weight, along with more and more companies taking an interest in sustainability. Some of the most sustainable companies (certified as such) are benefit corporations, a.k.a. B-Corps. There are over 2,000 B-Corps, including some large publically traded companies, such as Etsy (ETSY; NASDAQ) and Natura (NATU3; BVMF).

Robo advisors can play a key role in the taking the “belief-profile” to mainstream investing. With more precise technological capabilities, robo-advisors can quickly and simultaneously adapt to their client’s needs and the current state of the markets. New institutions, like Swell, provide research on publicly traded companies who stand to grow, based on social and environmental trends. It may be easy enough to say “I don’t care about _____”, but it’s hard to ignore socially conscious investments that outperform their benchmark indices. For example, since 1990, the MSCI KLD 400 Social Index has returned an average of 8.4% a year, compared to the S&P 500 index’s 7.6%.


The MSCI KLD started with the name “Domini 400 Social Index” or “DSI”

Any financial marketer can tell you that Millennials expect “personalized experiences.” Building a strategy around a client’s “belief profile” will help wealth managers deliver just that, all while making them feel good about putting their money behind their values.


Read More:

Where to Find Socially Responsible (Robo) Investing

What Is Socially Responsible Investing?

Calvert to Launch Responsibly Managed Ultra-Short Income Strategy in NextShares™ Structure

Ethical funds see jump in investment inflows


FAANGs in Finance Pt. 3: Google

What’s the #1 source for fast, accurate information? Google. With a culture of transparency and unparalleled data management capabilities, Google is positioned to help wealth managers engage clients by delivering the highest level of insight into their investments. With rumors circulating of a Google Wealth product, today’s financial institutions should act fast in embracing Google’s platform.

In a 2015 FactSet survey, high net worth individuals (HNWIs) were most excited about a wealth management offering from Google, citing their need for more frequent and in-depth insights into their portfolios. A UBS analyst famously used Google satellite images of parking lots to predict Walmart’s revenue. Google analytics can predict unemployment claims before the government finishes counting them. While Google Finance failed to gain traction from Yahoo! Finance, Google has improved the results of stock-market searches by pulling the charts, quotes, and news onto their main search result pages.Screen Shot 2017-07-19 at 10.48.13 AM.png

Google Revenue Breakdown.png

Google has danced around the more profitable parts of finance for one reason: Regulation. While Google may have an aversion to the regulated parts of finance, it can still become a major player in finance by leveraging its strength as a preferred platform, its trusted brand, and proven ability to store information securely.

Google still makes 86% of its revenue from unregulated online advertising. Aside from its moonshot projects, its other products are mostly tools to gather behavioral insights that, in the end, further boost their ad business. Here are some of Google’s products that could prove to be a gateway for financial institutions:


Google has not been shy about its ambitions in cloud computing. In fact, it has already made the Google Drive a passport platform for healthcare documents, see: How Google G Suite Helps Keep Your Hospital HIPAA Compliant. Google holds 27% of the market share for cloud storage, second only to Dropbox, with 47%.

The Google Drive would be an ideal place to bring together financial institutions and their clients – Google could allow financial institutions to create Google Drive Folders with securely stored client information, and allow the client to set up the PFM and wealth management tools they most desire, talk about personalized. To take it one step further, Google could leverage its platform to help clients control which third-party tools have access to their account information. This would position Google as a client-oriented provider, and help them ease sour relations within the EU – where PSD2 requirements are hanging over financial institutions.

Trusted Brand Offers & Engagement:

Google Account Opening 2 (1).png

Currently, Google’s financial ads take you outside of their platform to the advertiser’s site. What if they internalized this process by embedding offers, and actions, for trusted brands? In this scenario, Google users could create, fund and manage financial accounts all from Google’s secure, familiar platform. Consumers crave frictionless finance and already trust Google. Why force a user to navigate away, when you can bring these offers into the Google platform? This would boost Google’s user engagement, make it easier for financial institutions to onboard clients, and delight users with a smoother customer journey.


For individuals, Gmail is the email provider of choice with around 50% market share. However, cloud-based email is still in its infancy for larger companies; a recent Gartner study found that only 8.5% use cloud email from Microsoft, and a mere 4.7% use Google Apps for Work. The remaining 87% have on-premises, hybrid, hosted or private cloud email managed by smaller vendors. Most financial institutions are not using Gmail internally, but they should not underestimate Gmail’s potential for communicating with their clients.


Rather than serving as a gateway back to your financial institution’s website, Gmail could become a trusted platform for sharing secure information, proxy voting (which 72% of retail investors abstain from today), supporting customers on Gchat, and more.

Financial services emails today get a dismal 2.7% click-through rate. This weak communication channel could be displaced by an in-app messaging system that reduces friction and increases engagement with Gmail users – of which there are now over 1 billion worldwide.

We have explored 3 possible paths for Google to enter financial services, and there are infinitely many ways it could play out. We welcome you to leave comments to share your predictions for Google’s entry into Finance.

FAANGs in Finance Pt. 2: Amazon

This spring, at TechCrunch Disrupt Asia, a leading VC called Amazon the next biggest FinTech company. In this post, we explore the opportunities for Amazon to enter Financial Services – and how today’s Financial Institutions can leverage the Amazon platform to engage tomorrow’s investors.

The Chinese Parallel

Our “Amazon Wealth” prediction isn’t pure speculation – the company’s Chinese e-commerce counterparts have already become financial titans by embedding payments, loans, and investments into their consumer platforms. Alibaba, a $391BN market cap global competitor with Amazon, spun out one of the most successful fintech companies, Ant Financial.

Ant, the creator of Alipay, acquired MoneyGram for over $1BN in cash and entered the Spanish payments market through a partnership with Santander. Ant’s “leftover change” product, Yu’e Bao, took in over $165BN in under 4 years, becoming the largest money market fund in the world. It yields 3.93% on consumers’ spare change, a significant increase on traditional Chinese banks’ funds.


Amazon is as ambitious as Alibaba, from books to food, music to movies, AI & AWS, and most recently, messaging.  Last year, Amazon filed over 566 patents; this year, it has averaged 32/month so far. The top categories were computing and electronic communication, while their most active Trademark filings are 97 for advertising and 88 for scientific. A bit more digging yields filings for Trademarks on things like “Amazon Coin” which could be a Bitcoin-like cryptocurrency or an internal payment system. Amazon’s wide-ranging patent portfolio indicates they are eyeing multiple opportunities in finance.

How would “Amazon Finance” play out? We see a few paths:

Mirror Alibaba:

Amazon could accelerate their move into finance by gobbling up PayPal or Square. A PayPal acquisition would give Amazon social media assets in Venmo and a strong footprint in global payment systems. PayPal’s origins as a P2P payment system aligns with Amazon’s platform and position as an e-commerce marketplace. Paypal has also remained relatively nimble by avoiding the most cumbersome regulations that slow down other financial institutions, making the company an attractive acquisition target, given Amazon’s culture of “trimming the fat” to maximize efficiency.

Platform Play:

Growth in Amazon’s non-core business lines is often overlooked, but their Trademark filings convey continued ambition across verticals. Amazon could easily become a marketplace platform for a range of financial services from investment accounts to credit cards.  Amazon could build the systems for financial firms to open accounts, enable customers to manage the accounts and interact on Amazon. Over 70% of digital natives would trust Amazon more than a bank site, so why not bring them into the Amazon Tent? This would allow financial firms to leverage the Amazon platform to engage customers, without the regulatory hassle.  The “Platform” angle would give Amazon the “kingmaker” role with Financial Service firms.  The “Platform” play gives them another service to put onto their new messaging service “Anytime,” following in the footsteps of Alibaba’s chief rival WeChat.


Alt Currency:

An already trademarked ‘Amazon Coin,’ the name of which currently only used for game and app purchases, could be a bold yet logical entrant to the booming Cryptocurrency market. Amazon already does $135BN in annual revenue. Combined with their ability to leverage their reputation for security, Amazon is a natural market maker, the middleman for vendors, suppliers, sellers, and customers. Increasingly positioned as a central pass-through for all things commerce, Amazon launching its own cryptocurrency would keep customers sticky to their platform and boost their bottom line.

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Amazon has trodden lightly thus far with its financial services offering, but we don’t expect their idleness to last for much longer. While we present Mirror, Platform, and Alt Currency as 3 potential paths, there are certainly many more paths that Amazon could take.  What do YOU think Amazon’s next move will be? Send us your thoughts.