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.

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“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 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 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

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 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 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 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.

Infographic citigroup employees.png



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 Ukranian 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.

Is FinTech Failing?

No one is denying that the FinTech space is ripe with innovation. What most fail to realize though, is that mainstream media outlets tend to report on us with a survivor bias. If you look around, you may have noticed quite a few FinTech companies are going under (click here to see a piece by Benzinga that includes a slew of failed companies).

While VC funding is often cyclical, there are still many unicorns in existence. Despite not being household names, Square had a successful IPO, and Stripe, Transferwise, and Addepar all received lofty valuations. In 2016 overall, FinTech companies received $36 billion in funding across from over 1700 unique investors.


While this was a $2bN decrease from 2015 funding, the growth cycle for FinTech companies is longer. Historically, the average time for IPO or Exit looks something like the chart below. The mass “buzz” factor tends to be quieter, and the sales cycle longer.  



While we don’t deny the foundational shift against app-based ad-supported businesses, we also see big opportunities. As we deploy our SDK solution on more than 100 partner apps, these apps have seen a 3-4x boost in user engagement and awareness. This is a measurement of enabling financial institution customers to take actions on publisher apps, and these financial institutions are increasingly moving towards “action” based compensation. This is a systemic shift towards enabling technologies like ours to provide the basis for monthly recurring revenue (MRR) and action based incentives.

Net Neutrality Update

If you’ve been on the internet in the last week, you’ve probably seen some mention of protecting “net neutrality.” While the term sounds self-explanatory, it’s more important than most realize. Net neutrality is the principle that Internet service providers (ISPs) and internet regulatory entities must treat all data on the Internet equally. It prohibits internet providers from charging differently by user, content, website/application, or communication mode. John Oliver gave a spirited review of the issue. Essentially, without net neutrality, ISPs would be able to charge companies and consumers for preferred speed and access to certain sites.


Net Neutrality prevents a traffic hierarchy

In 2015, four million people petitioned the FCC to reclassify broadband ISPs to protect net neutrality. This public support was unprecedented, forcing the Commission to enact strong rules, called the Open Internet Order, in favor of a neutral internet. However, in the last couple of months, President Trump and the FCC Chairman, Ajit Pai, are looking to overturn the 2015 Net Neutrality win, despite the prevailing popularity of the rules across party lines: 77% percent of those surveyed still support the FCC’s rules. The only group pushing for a repeal is your friendly neighborhood ISPs, a.k.a. Big cable. It’s worth mentioning that ISPs aren’t exactly taking the outrage well, AT&T even tricked some customers into sending pre-written protest messages that actually are against net neutrality.

The formal “Day of Action” passed this Wednesday (7/12), but if you support better and fairer internet speeds and access, or you’re against padding the pockets of Big cable, you can still sign the actual petitions against the FFCs new proposed changes at a number of sites, these are the top 3: | |

Luckily, the outcry has been successful. So far, there have been 4 million comments to the FCC, 2.5 million petition signatures, 10 million e-mails to Congress, and 500,000 calls to the FCC and Congress. With those numbers, we can see that many people out there care. However, continuing the dialogue about a free and open web is paramount for both consumers, big sites like Facebook and Google, and us here in the FinTech space.

Read More Here:

–Internet Service Providers Were Not Amused by the Net Neutrality Day of Action

–Apple’s deafening silence on net neutrality

–The net neutrality fight is on: Where do we go from here?

–How to Smoke Out Where Broadband Companies Stand on Net Neutrality

FAANGs in Finance: Joining the Customer Journey

The biggest opportunity for Financial Institutions today is getting their product into Google, Amazon, and Facebook’s customer experiences.

72% of millennials would rather bank with Google, Facebook or Amazon than their existing financial institution. You have to wonder how long it will be before these tech giants launch their own financial products.  Financial institutions already receive over 50% of their web visits from clients who pull their information onto other platforms; customers want their financial information everywhere, not just on their financial institution’s website.


Financial institutions have their own apps, but few are capturing eyeballs like the tech giants do. I encourage any financial executive to try the “Battery Usage” test: on your iPhone  => settings =>battery => scroll down and look at which apps drained your battery for the last 24 hours & 7 days.  We have yet to find anyone with a Financial Institution in the top 5.

Over the next 3 weeks, we will explore the potential of Financial Institutions bringing their customer journey into the experience of Google, Amazon, and Facebook.  In each of these cases, we will discuss how these three companies can serve as safe, secure, trusted platforms for Financial Institutions to engage with their customers, breaking free from click-based advertising to action-based engagement.  These social platforms continue to do what they do best, increase engagement, while the Financial Institutions reap the benefits for their clients.

PS:  We’ve covered WeChat as an operating system here – we look west to learn the best practices, customer trends, and applicability for the US market.

Fintech News: June 23rd, 2017

New Trading Service Declares War On ‘Disgraceful’ Commissions (Forbes)

The UK market has it’s own free-trading broker now, Trading 212. While all of the major US brokers charge around $5-7 per trade, UK brokers typically charge around £11.

US Wants Travelers to Declare Cryptocurrency Assets At Border (International Business Times)

Regulators are hoping to control the threat of moving money across borders to fund terrorism. However, it’s still fairly easy to do that through traditional financial channels, and the evidence that cryptocurrency funds terrorism is mostly anecdotal, as of today.

Will Amazon Become a Force in Fintech? (TechCrunch)

EY thinks Amazon is the most likely tech company to get into finance, first by expanding into payments and lending.

Investing in Crypto: Go Long

To invest in crypto, learn how it works, and start actually using it.

If you’d put your Holiday bonus into Bitcoin, you’d have doubled your money by now. If you’d bought Ethereum instead, you’d be up 3,000%. Bitcoin, Ethereum, and the growing number of altcoins in the market have all rallied over 150% since January.

However, most money flowing into these currencies today is speculative. Some are calling it a bubble – with talking heads on TV covering Ethereum, and regular people “investing” in cryptocurrency to make a quick buck. While this buying activity drives up the price of Bitcoin and Ethereum, it’s also causing more price volatility in both directions. It is time to rethink cryptocurrency investing, with the goal of contributing long-term value to the ecosystem, not propping up the price bubble.

Screen Shot 2017-06-22 at 9.29.44 AM.png

Both cryptocurrencies are their own ecosystems, with Bitcoin’s acting more like a digital gold, and Ethereum acting as a platform for smart contracts. So, if you believe these technologies have a place in our future, you should be regularly buying bitcoin and then using it as a payment when possible – buy lunch with bitcoin, send your friend money with bitcoin, etc. Bitcoin’s market cap gets the most attention, but it’s transaction volume, another key measure of adoption, is mostly overlooked.

Ethereum is a little different – by allowing people to build new cryptocurrencies on top of smart contracts, it acts as a platform for enforcing the rules. If bitcoin is digital gold, Ethereum is more like a digital form of the US government.

With a more flexible and modernized programming language, Ethereum has made headway with multinational companies alongside the growing startup ecosystem. These players can build their own coins and sets of rules on top of Ethereum’s technology – like a “white-label” cryptocurrency.

Some interesting projects on Ethereum’s platform include:

  1. SlackCoin – an artificially intelligent chatbot that rewards employees for certain behaviors. Want to incentivize information exchange? Open communication? Boost efficiency? Set up SlackCoin. SlackCoin is an alt-coin incentive to be the employee you’d want on your team.
  2. FileCoin – The AirBnb of hard-drive space. Have an extra 500GB? Rent it out to the network and get paid in FileCoin. Then when you need to borrow some later, you can spend your FileCoin instead of buying a new hard drive.
  3. KYC-Chain – A virtual wallet to authenticate your identity. Instead of doing know-your-customer from scratch every time you open a financial account, all institutions can refer to the KYC-chain.

There are dozens of new applications being produced on Ethereum every day. Like Bitcoin, investing in Ethereum means investing in its real-world applications. If you’re putting money into cryptocurrencies with the goal of converting it back into USD for a quick profit, you’re not investing, you’re gambling.

Where Robo-Advisors Went Wrong

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.


In the past 5 years, VC-backed robo-advisor startups appeared left and right, offering low-cost diversified ETF portfolios that are “advised” algorithmically with a risk questionnaire. Many industry analysts were quick to call their bluff. The robo-advisors, they said, were just a traditional target-date retirement fund with a sleek mobile app, marketed as a replacement for a human financial advisor.

The Copycats

Revolutionary technology? Maybe not. But the startup robo-advisors were onto something, and incumbents started copying them. In 2015, Vanguard and Schwab launched their own robo-advisors, which gobbled up more assets in six months than the startups did in four years, combined.

Vanguard and Schwab eclipsed the startup competition, not because their product was better, but because they had economies of scale, a recognizable brand name, and large customer bases to cross-sell to. All of this translates to a relatively low customer acquisition cost (CAC) for their new products.

E*TRADE and TD Ameritrade have since released their own robo advisors. Fidelity, Merrill, and Morgan Stanley are likely follow suit, further eclipsing the market.

An Uphill Battle

Analysts estimate startup robo-advisors spend up to $1000 to acquire a new customer, and will need $40B in assets to break even. The largest startup robo-advisor, after five years operating, is at $10B, and growth rates have slowed drastically. 

With incumbent robo-advisors going “mainstream,” most people have access to a robo-advisor from their existing financial institution. Given the high costs of switching, this doesn’t bode well for the startups’ growth.

What’s next?

For the well-funded startup robo-advisors, a diversified product suite is a good next step. That way, they can cross-sell to the (mostly young) clients they acquired, as their financial needs become more complex. Wealthfront, the second-largest startup robo-advisor, seems to be pursuing this strategy, offering a portfolio line of credit, 529 plans, and direct-index investing to help wealthier clients avoid underlying ETF fees. Complementary products might boost per-customer revenue, but until a startup robo-advisor can drastically lower their acquisition costs, they will continue to experience the same setbacks.

For the next generation of fintech startups, the rise and fall of startup robo-advisors provides some valuable lessons:

  1. Invest in technology, not customer experience and design, which are too easy to replicate.
  2. Watch your CACs. Robo-advisors reduce some operational costs, but that edge is wiped out by sky-high acquisition costs.
  3. Sell high – don’t raise money at valuations that make exiting impossible.
  4. License your technology to the industry you thought you’d disrupt. B2B robos need just a handful of deals to prosper, and can do so with less manpower.

Beneath the glitz of the heavily-funded fintechs, smaller players are already focusing heavily on technology. In the investment world, tomorrow’s winners will build tech to enhance the incumbents, rather than competing for their customers.

Announcing: Interactive Brokers, Powered by TradeIt

We’re excited to announce that we’ve connected our core products — Portfolio View and Trading Ticket — to Interactive Brokers, the largest electronic broker by DARTs and a top choice for active traders worldwide.

Over the past month, we launched early-access IB support on Stockflare and the Trigger Finance app. Today, we’re extending IB connectivity to our entire partner network, so IB clients can view their accounts and trade from any of the apps in our sphere.

IB and Trigger 2 (2).png

“As one of the leading platforms for active investors, we are constantly upgrading our systems for the future. We’ve heard from our customers that they want to be able to take secure action from the apps they use,” said Steve Sanders, Executive Vice President of Interactive Brokers. “Our partnership with TradeIt enables IB to reach our customers wherever they prefer to operate with a high level of sophistication and security.”

After four decades of focus on technology and automation, Interactive Brokers is equipped to provide cutting edge technology and tools at the lowest costs in the industry. We’re thrilled to distribute IB’s offering across our partner network to help their clients stay connected from anywhere.

If you’d like to add IB connectivity to your platform, shoot us a note at


FinTech News: May 26th, 2017

Summer has sprung! Here are our top Friday reads this week:

A Quant Program is the Reason You Just Bought that ETF (WSJ)

BlackRock is using Twitter sentiment data to sell you their funds at the perfect time.

The World’s Largest Bitcoin Exchange Couldn’t Handle this Week’s Crypto Boom (TechCrunch)

Bitcoin hit all-time highs at $2,800 this week, and traffic was so high it crashed Coinbase, spooking some investors.

Teen chat app Kik to launch digital currency (Finextra)

Kik, sometimes called the “WeChat of the West,” launched its own cryptocurrency, “Kin,” for in-app transactions and services offered on the platform.

The View From Europe

We had the privilege to attend and present at EXEC Conference in Berlin last week. In an ideal location and surrounded by great company, we observed a rational, results oriented ecosystem that offers plenty of lessons and observations for the broader market.  Here’s what we learned:

PSD2 Matters

PSD2 was mentioned on nearly every panel. The law may not be implemented until 2019, but it is already encouraging innovation in the FinTech and Financial Institution landscape. Financial Institutions are not trying to stop it, and FinTech companies are seizing on the opportunity to collaborate with Financial Institutions under PSD2.  (Note:  I am sure that the sausage making behind the scenes is much less collaborative.)  Examples of the collaboration are evident in the number of API service providers represented; Financial Institutions with “at-the-ready” APIs and Fin-Tech companies such as Figo and N26 charting new business paradigms.

Framework-Based Discussions

The dot com bubble taught me that data should drive decisions, and strategic frameworks can uncover exciting & otherwise invisible opportunities. Lately, the US tech market feels more like a reality tv show than a real framework-based industry. At the EXEC conference in Berlin, high-level strategic frameworks were front and center, with panelists and keynote speakers displaying “value chains” to contextualize their arguments. Particularly in the Fintech eco-system, value chain analyses reveal multi-billion dollar opportunities, and help Fintech companies focus their resources strategically. This brings me to N26.

N26’s Model

One of the first keynote speakers opened with a simile: financial institutions today are like frogs boiling to death in a pot of water: the clock is ticking for them to innovate or boil. N26, a relatively young bank based in Berlin that has raised over $50MM, presented some important lessons that can help FinTech startups and incumbent banks avoid boiling. N26 has two notable differentiators: Design & Platform. On the design front, N26 wanted banking to be beautiful.  As their founder noted, 7/10 millennials would rather go to the dentist than their bank. N26 makes banking a beautiful experience, a quick way to draw in young clients. But beautiful design is easy to replicate; N26’s staying power is all thanks to their platform. While big banks are bogged down by legacy systems, N26 leverages best-in-class providers like TransferWise to provide non-core banking services, such as transfers, lending, credit and more.  N26 is a platform bank, with the potential to become a marketplace replacing the end-to-end ego of traditional banking with an adaptable tech platform for changing times.

When we stitch together these three observations, we see a bright future for TradeIt, as we build, manage and distribute APIs for the spectrum of investing firms. At the same time, we recognize that rescuing frogs out of boiling water will inevitably leave you with a few burn blisters.

Who’s buying $SNAP, and where?

$SNAP’s IPO has dominated financial news for the past month. After the stock gained 45% on its first trading day, bloggers called it “dumb money,” and not a single Wall Street analyst gave it a buy rating until today. In this post, we compare our transaction data for three social media giants: here’s our take on $FB vs $TWTR vs $SNAP.

Not So Millennial:

According to the headlines, $SNAP investors are a bunch of college-aged power-users buying their first stock ever. Our data points to a more diverse group of investors: our average $SNAP order size was over $10,000, which was slightly higher than the average order for $TWTR. A fair share of young people invested in $SNAP, but given the volume and quantity of large retail orders, it looks like Gen-Xers and Boomers are buying shares as well.

Fear of Missing Out

ezgif-3-b9aa9a85bdWhat’s more interesting is where people are trading these stocks. A large portion of our trade data comes from from social trading communities like StockTwits, where investors can share predictions on a stock’s direction. The $SNAP IPO generated huge buzz on these networks, with a steady stream of speculators sharing their opinions and price targets for the company.

Social InfluenceIt looks like all the buzz influenced some investors to join the party and buy in. Investors were twice as likely to buy $SNAP from a social investing community when compared to $FB and $TWTR. Sounds like people in the forums are buying $SNAP because, well, everyone is doing it.

Trading the Headlines

Though everyone was talking about $SNAP last week, most financial commentators were talking $SMACK. Investors were much less likely to invest in $SNAP from a news website; they were 10 times as likely to buy $FB and 3 times as likely to buy $TWTR when reading the financial news. If you take a look at the headlines, you can see why:

News InfluenceSnapchat IPO: Don’t Confuse Popular with Profitable (Forbes)

Is Snapchat IPO the Good Kind of Crazy? (Bloomberg)

SNAP is Clown Car 2.0 (Fortune)

The Complete Bearish Case Against Investing in SNAP (Business Insider)

So, if you’re reading the grim headlines in the news, you’re probably not investing in Snapchat without doing more research elsewhere.

In the weeks since $SNAP’s IPO, we’ve been surprised by large order sizes of the supposedly “millennial” stock, the large influence of social platforms, and the small number of news-related transactions. Got ideas for our next data dive? Tweet us!

Online Brokerage Price Wars, Part 2

Looks like last month’s price war was just the beginning. Here’s the current state of the stock market pricing war:

Typically, brokers change their prices once every five years. In the past month, they’ve dropped fees twice already. Last week, after Fidelity announced $4.95 trades, Schwab shot back by matching the price. TD Ameritrade, which is more popular for active traders, joined the battle by dropping fees 30%, from $9.99 to $6.95. Their competitor, E*TRADE, remained silent the longest, but ultimately followed TD to $6.95. Here’s what the low prices mean for the industry:

Redefining Discount

TD Ameritrade and E*TRADE are in the process of acquiring Scottrade and OptionsHouse, respectively. Tradeking is being acquired by Ally at the same time. Until this week, Scottrade’s $7.00 and Tradeking’s & OptionsHouse’s $4.95 were some of the lowest commissions in the industry, a major selling point for these firms.

Now that Fidelity and Schwab have dropped to $4.95, their super-discount competitors will have to drop their own fees even further, or find a new way to compete on something other than price. It’s likely that the battle will continue when these players cut fees below $4.95.

Price Wars Graph.png

Customer Value Reshuffled

With less revenue coming from trade commissions, the definition of “most valued customers” is changing. Brokerages now make more money off of management fees, interest on margin and cash balances, and fees on their ETFs & mutual funds. If you trade stocks yourself, your broker might start cross-selling to you, hoping to make more off of advice and fund fees.

Stockflix, Stockify, Dollar Stock Club

Remember paying $.99 per song? Online brokerages are still using the pay-as-you-go model the music industry abandoned years ago. We predict subscription models will make their way into the brokerage world. Instead of paying per-trade, investors will pay monthly subscription fees that include a certain number of trades, access to research, and other perks.

Less Now, More Later

Brokers should listen to their own advice and start thinking long-term. While a subscription model might not produce huge profits at first, it will provide steady revenue when trading behaviors die down. Per-trade fees generate huge profits when the market is booming, but those profits dry up quickly when the market spooks retail investors.

If you bought E*TRADE stock 10 years ago, you’re down 84%. Adopting a subscription model will save online brokers, and their shareholders, from the volatility that comes with depending on unpredictable market conditions. Instead of worrying about the next fee war, online brokers should start poaching Spotify execs.

A Letter to Regulators

Over the past few weeks, we covered the data battles taking place in fintech. As the CFPB deliberates on whether to defend data aggregation, we urge them to remember their mission to “empower consumers to take more control over their economic lives.” To grant data ownerships to banks, rather than consumers, would represent a stark failure of the CFPB to deliver on this mission.

We encourage anyone who cares about their data to write the CFPB at the email address below.  As Plaid, Yodlee, and other tech innovators have argued, continuing to innovate in fintech relies on customer data ownership. Here is the letter we sent to regulators:


Data Dive, Part 1: Trading The 2016 Election

How has investing changed after the election? In our first Data Dive of 2017, we use transaction data to find out.

Since Trump’s win in the 2016 election, the S&P 500 has rallied 10% and hit multiple all-time highs. The market may be on an upswing, but how has investor behavior changed? To answer this question, we’re taking a look at our transaction data, comparing behavioral patterns from the month before the election with those exhibited in the weeks after the news.

Here are some of our findings:

Order Size.pngBuy Low, Sell High?

Looks like some investors are locking in their gains after the Trump bump. Since the election, our average sell order size has shot up by 50% while the average buy order size dropped by 11%. It looks like investors have been hoarding cash since the election, maybe waiting for an opportunity to buy at a discount if the markets get shaky.

Peak Hours.pngLazy Mondays

Before the election, Monday mornings were red hot on the trading floor. Post-election, traders started waiting until the end of the trading day to hit confirm – maybe holding out until volatility settles around 2-3pm.

It appears traders continued taking their sweet time after Monday into the middle of the week. While Tuesday was the hottest day of trading before the election, Wednesday appears to have regained its title as “hump” day, claiming the highest average volumes in the weeks following the election.

Peak Trading Days.png


Draining the Swamp

tech-inflowsWhatever your political views, it’s fascinating to see how a new administration can affect people’s’ portfolios. For example, our data suggests that investors are “draining” tech stocks from their portfolios after the election. Despite a few high-profile endorsements, Trump’s win is widely considered a net loss for the tech industry, which relies on visas for highly skilled immigrants to power innovation. As a result, investing in tech companies means is riskier in 2017, and investor appetite for the sector has cooled off.

A Golden Opportunity

Gold Outflows.pngGold’s price tumbled 12% in the last weeks of 2016, but it looks like retail investors are staying put and holding onto the precious metal. While inflows remained relatively steady, our Gold-related outflows plummeted after the election. Given Trump’s unpredictability, this makes sense; Gold is seen as a safe-haven investment, and its value often increases during times of uncertainty.

Got a hypothesis for us? Interested in additional info? Email us or Tweet your data requests @TradingTicket for our next installment of the Data Dive series!

About the Author

James Barrios is a Management Science & Engineering Masters Candidate at Stanford University.  James will be investigating patterns, trends, and other useful data extractions over the coming months.  For this piece, James compared “Buy” and “Sell” orders placed before and after the November election.

Aggregation Wars, Part 4: Europe

Across the pond, EU regulators are building a secure consumer-oriented financial ecosystem. To stay relevant as a global innovator, regulators in the United States act fast in doing the same.

Last January, European regulators passed the PSD2 law, which grants ownership of account data to the bank customer rather than the bank. Under PSD2, financial institutions will be required to provide free access to their customers’ accounts to any third party that the customer authorizes.

The Customer is Always Right

Consumers win under PSD2, because it encourages competition in the digital financial product space. Instead of being forced to use their banks’ clunky services, Europeans can sign up for any sleek new service, then authorize it to connect to their bank. This new and open market has tech companies building products that are better functioning, customizable, and more mobile-friendly than the existing products offered by banks.


PSD2 in GIF format, source: Medium

Smarter, Simpler Regulations

In the United States, regulators are still years behind their European counterparts. The challenge lies in crafting laws that remain relevant as the technology evolves over time. To avoid over-regulating the industry and creating never-ending work for themselves, US regulators should build a framework of principles and “best practices” for the industry. Without micromanaging the details, they must foster:

  • Ease of Connectivity: the adoption of a universal financial “language” that makes it easy for banks, customers, and fintech companies to share data using the same protocol
  • Safety: Security standards that prevent unauthorized parties from accessing customer data
  • Consumer Protection: Acceptable use of customer information and disclosures

Acting Fast

It is time regulators take a stance in this debate with simple, forward-facing legislation. If Silicon Valley and New York are to remain competitive as fintech hubs, they need legislation that remains relevant as the fintech sector continues to evolve.

Price Wars: Online Brokerage Edition

Last week, Schwab cut its trading fee from $8.95 to $6.95, kicking off the 3rd Online Brokerage Price War – an occurrence that has happened every five or six years since the dot-com boom. Here’s what this “price war” means for the retail investor and the online brokerage community:

Short-Term Scramble

Schwab Fee Cuts.pngThe next few weeks will see Schwab’s competitors scrambling to reset marketing campaigns, hold emergency meetings at the executive level and rethink their 2017 operating models.

Two of Schwab’s largest rivals, E*TRADE and TD Ameritrade, are in the midst of acquiring super-discount brokers OptionsHouse and Scottrade, respectively. These brokers charge $5-7 per trade, but their acquirers have stuck to $9.99 trades since 2010. If E*TRADE and TD plan to start charging their newly acquired customers $9.99, then Schwab’s latest price cut might lure price-sensitive investors, at a time when their primary broker is distracted with integration activities.  

In the short-term scramble, we will be watching to see how Fidelity responds, if TD and E*TRADE sync their prices with their new acquisitions and what it means for lower-cost firms such as Interactive Brokers, TradeKing and TradeStaion, who are already being challenged by upstarts like RobinHood and TastyWork.

Falling Fees, Shifting Valuations

Historically, when one large broker slashes fees, the rest follow suit fairly quickly. That’s why online brokerage stocks plummeted 10% last week: they’ll all be forced to drop fees to stay in the game. Consumers should watch for new deals as brokers get more aggressive on their acquisition bonuses.


Why now? A Historical Reference

The first price war occurred in 2005, after online brokerage valuations tumbled 90% since the dot-com burst in 2000. Brokerages wanted to build their customer bases and rely less on commission fees, so they slashed trading fees, and started focusing more on mutual fund fees and parallel banking services, which provide steadier revenue streams than trading.

In 2010, as the US economy emerged from the financial crisis, brokers began wooing customers to get back into the markets, and lower-fee offerings were a key component of their pitch.

If we use history as a reference, the 2017 price war looks similar to its 2005 predecessor. The asset-gathering strategy is coming back into fashion, but this time it has a robo-twist. Schwab launched its own robo-advisor in 2015, which charges no trading fees but holds Schwab ETFs and a hefty chunk of cash. TD and E*TRADE followed suit last year, with “Essential Portfolios” and “Adaptive Portfolio.” It seems only a matter of time until Fidelity joins the robo-advised party.

In the meantime, low trading fees are getting new clients in the door, boosting trade volumes, and giving brokers a cross-sell opportunity for their more profitable offerings. In short, brokers are slashing fees in 2017 because they can’t afford not to.

The Bottom Line

The 2017 price war is just getting started. While brokers are working to figure out new revenue streams, consumers should keep their eye out for more price cuts, and more robo-advisor offerings, in the next year.

Aggregation Wars, Part 3: The Opposition

In last week’s episode of Aggregation Wars, we covered the big banks’ lobbying effort to stop aggregation. This week, we profile the fintech companies who are fighting for aggregation and for the consumer’s right to access their financial data.

FinTech companies are forming an opposition party in the battle over aggregation. Some are familiar, and others are behind-the-scenes. Here’s who’s defending your data ownership:

The Companies You Know

digit-account-and-text-610x591Mint, Acorns, Digit, Kabbage, Betterment. These fintech companies offer direct-to-consumer financial products like robo-advised brokerage accounts, automated savings tools, and loan-refinancing platforms. Some of these companies are financial institutions of their own while others, like Digit, are not. None of them compete directly with banks, but all of them require access to your banking data. For example, Digit analyzes your spending habits to help you save for custom goals like a vacation. Without open access to customer banking data, these tools could not exist.

The Companies Backstage

7394dd_3b3664e7ac814efd8e5bc9aa70cdf71e.pngBehind each of these shiny new apps, there is a network of technology providers who build “pipes” that connect to financial institutions: Yodlee, Plaid, Quovo, Intuit. Without stable, secure API connections to the big banks, these aggregation technology providers are stuck using more primitive (and less secure) screen-scraping technologies to grab user data. Clearly, these companies want open access to consumer financial information.

Joining Forces

The FinTechs you know and the ones you don’t are joining forces to fight for consumer data access. This month, they formed the CFDR, or the Consumer Financial Data Rights Group. The group’s goal is to convince the CFPB that secure data access is a win for all parties: FinTechs, banks, and consumers. More broadly, the group supports collaboration between banks, regulators, and FinTechs that will help them align around common goals: building a secure financial ecosystem that benefits and protects the consumer.

While “FinTech” might yield visions of nimble, garage-style startups, there is big money behind these growing companies: global FinTech investment reached $22 Billion in 2016, and that’s from Venture Capital alone. Still, it’s nothing compared to the deep pockets of the big banks. Hopefully, the CFPB will realize the potential of free-market competition for financial products, and the FinTech Industry’s suggestions will be received well.

What’s next?

The CFPB will continue to accept letters while it weighs the pros and cons of open access to financial data. As you read this, the ABA is working to discourage aggregation practices, and the FinTech-backed CFDR is working to improve them. You have until February 14th to contribute.

Next Up: Europe and Beyond

In the next installment of Aggregation Wars, we look take a look at the open API initiatives in Europe, The UK, Singapore. If the US is to remain competitive on the global fintech front, we will need to catch up to these countries with consumer-first regulations that encourage innovation, put security first, and lay the tracks for a more inclusive, consumer-friendly financial services architecture.

Aggregation Wars: Part 2, Bank Backlash

The Pandora’s Box of customer banking data has already burst open with the popularity of third-party financial products. Still, banks are doing all they can to restrict their customers from accessing their own data. What gives?

Aggregation has become a flashpoint between hundred year old banks, the CFPB and customers. In the first installment of this series, we looked at the history of aggregation technology, and its improvements since the first dot-com boom. This post explores the banking industry’s opposition to aggregation, and provides a path forward for US regulators.

New Enemy, Same Tactics

This year, the American Banking Association came out against aggregation technology, citing the same concerns and scare tactics they have relied on for twenty years. Today, aggregation technology is exponentially more reliable and secure than it was in the late 1990s. While the enemy has evolved, the banks are still using the same plan of attack.

In 2001, the OCC issued a “Guidance Memo” to banks that listed five risks posed by aggregation:

  • Strategic Risk
  • Reputation Risk
  • Transaction Risk
  • Compliance Risk
  • Security Risk

Since then, several of these concerns have been made obsolete by technological advancements. Others proved to be illegitimate in the first place. Regardless, the ABA’s latest arguments revolve around the same old concerns of “data usage” and “security.” In his 2015 shareholder letter, Jamie Dimon dedicated significant air time to criticize aggregators, and took direct action by cutting off JP Morgan’s customers from using While the security concerns are exaggerated, the rising popularity of PFM tools means that they are racking up significant server costs for the banks. In other words, JP Morgan doesn’t want to pay to import its customers’ data to

Enter the Regulators

The CFPB is a government watchdog set up to “make consumer financial markets work for consumers.” In November 2016, they held a field hearing in Utah to spark a public debate over aggregation. While the hearing made room for a healthy debate, it has opened the floodgates to banking industry lobbyists and the influential American Bankers Association, which continues to fight against aggregation.

If the CFPB plans to keep their promise to protect consumers, they should weigh popular consumer opinion against the lobbying effort of the big banks. In 2016, over 70% of customers trust the top tech companies more than their banks. A fair ruling will incorporate changing user behaviors and advancing technologies into its decision. Got an opinion? You can submit letters to the CFPB by February 14th, 2017.

Towards a Working Regulatory Framework

As it moves towards establishing new laws, the CFPB should stick to principles-based best practices that will remain relevant as the technology, and the debate over data ownership, continue to evolve. In particular, the industry will benefit from guidance around:

  • API Framework: Financial Institutions should identify 1-3 “Approved Vendors” to build and manage their APIs. The financial sector can trim inefficiencies using a standardized protocol for data, just as the healthcare sector has over the past ten years.
  • Customer Control Center: It must be easy for consumers to manage where their data is flowing. Banks should be required to provide a clear dashboard of all third-parties who are plugged in. This way, consumers can unlink their accounts from products they no longer use, keeping their data under control.
  • Re-examine OFX: As we mentioned in the first in this series, Intuit and Microsoft developed the OFX to avoid the Aggregation Wars.  Is now the time to re-examine a protocol that banks can support for distribution?

In our next installment of this series, we will take a closer look at the European regulations, and the lessons the US can learn looking forward.

Aggregation Wars, Part 1: Near History

Twenty years after the birth of the internet, aggregation remains a hot topic in financial services. Today, aggregation enables consumers to access all of their accounts in one portal, while also serving as a valuable data collector for financial institutions. In Europe, where regulators have supported aggregation, banks are learning to use it as a revenue-gathering vehicle. In the US, banks are still flip-flopping over whether or not they support the use of aggregation. As the battle continues to play out, we expect aggregation to play a key role in helping financial institutions, and associated technology providers, focus on what is best for the consumer.

This post marks the first of a 4 part series on aggregation:

  1. Near History
  2. Current Aggregation Wars
  3. Europe, Data and Confusion in the US FI Sector
  4. Putting the Customer First

Part 1: Near History

In 1997, Microsoft & Intuit created secure protocols for transmitting personal financial data, called OFX, in collaboration with Checkfree. Both companies had a vested interest in this technology: they were building their own personal financial management software (PFM).  At the time, however, financial institutions balked at the new technology, preferring to keep a tight stronghold on their customers’ financial data.

Around the first dot com boom, there were a growing number of venture backed aggregation services such as CashEdge, Yodlee, Teknowledge, and Vertical One. These services allowed consumers to access their financial information on PFM sites without having an “official relationship” with the financial institutions. This was a major win for the consumer, who could now manage all of their accounts in one place thanks to the early movers of PFM services: Intuit, Microsoft, and Yahoo! Finance.


During this time, some of the major banks joined the PFM “race” by building their own portals to aggregate customer accounts from other financial institutions. In the final part of this series, we will share a comprehensive review of the products & services services offered by banks for PFM- let’s just say you should get your magnifying glasses ready if you want to find the services or read the fonts.

In 2006, at the dawn of Web 2.0, disrupted the software vanguard, Intuit, with an online service that Intuit later acquired in 2009. Founded on the premise that Intuit’s service was sub-optimal, Mint leveraged Yodlee for aggregation and offered a graphically rich and engaging PFM experience that also incorporated best practices of contact management to engage customers (something that continues to be the challenge with the “liability” side of PFM. Finally, the value of aggregation started making sense to the consumer.


Through the last ten years, since the advent of, account aggregation has discovered countless new use cases, from PFM to providing data for banks, advertisers, hedge funds and wealth managers. Despite using aggregation for their own purposes, banks have surfaced a rotating set of objections to aggregation, citing security concerns, owning their customers, and data costs. We will elaborate on these contradictory objections in Aggregation Wars.

Over this period, the industry has seen oscillating phases of growth and consolidation. Notably, Yodlee bought VerticalOne right out of the gate in 2001; CashEdge sold to FiServ in 2011 for a rumored $465MM; Teknowledge filed for bankruptcy in 2013; ByAllAccounts sold to Morningstar for ~ $30MM in 2014; and Yodlee sold to Envestnet for $590MM in 2015. Some of these companies, like CashEdge, built popular consumer-facing products, while others, like ByAllAccounts, reached widespread adoption by wealth managers. With so many different use cases, it’s clear that aggregation technology is no one-trick-pony.

Most recently, two new entrants have been eroding incumbent market share with “newer” technology. Quovo and Plaid have managed the banks’ objections and provided clearer value propositions to the mobile developer community. Quovo’s focus on wealth management and Plaid’s “instant funding” product show that there is still plenty of room for innovation and growth of aggregation technologies.

The big questions for the future of aggregation will include:

  • How are Financial Institutions leveraging Aggregation for Wealth Management & Messaging Platforms?
  • What are the opportunities and threats posed by aggregation for Financial Institutions?
  • Who owns the customer’s banking data?
  • Which Messaging Platforms will Enable Aggregation & Wealth Management?
  • Which Wealth Management Platform Builds or Buys an Aggregation Service?
  • How will A.I. impact aggregators?
  • Will the CFPB become more assertive in supporting consumers?

Price Wars: ETF Edition

Taco Bell and McDonald’s aren’t the only companies chasing the dollar menu audience. The major financial institutions are in a price war, cutting their ETF expense ratios in a back-and-forth which has led to the steepest decline in fees since the online brokerage was invented during the first dot-com boom.


These are the three forces driving the ETF price war:

1. The Walmart Effect

vanguard-effectThe three largest ETF issuers (State Street, BlackRock, and Vanguard,) control a staggering 84% of the $3 Trillion dollar market. Vanguard has used a client-owned corporate structure, paired with massive scale, to cut fees and grow assets for decades. However, it has traditionally focused on core ETF offerings that track indices, rather than sector-oriented products like Cybersecurity ETFs.

Recently, Vanguard has started expanding into more sector-oriented products, like international dividend or country-specific ETFs. These types of investments were previously dominated by smaller funds with higher expense ratios. However, as a recent Bloomberg article revealed, Vanguard’s entry has put downward pressure on smaller issuers’ prices, like Walmart opening up next to a mom-and-pop store.

2. Explosive Asset Growth

In the last three years, ETFs have seen record-high inflows as more investors shy away from high-fee and actively-managed products. Today, ETF assets under management stand at $3 trillion, a 430% increase since 2006, and this growth is only expected to continue. In fact, the market is expected to reach $10 trillion in assets by 2020.

asset-growth-ratesAt the same time, mutual funds have seen massive outflows as investors opt-out of their high fees and tax inefficiencies. While the ETF AUM has grown 430% since 2006, mutual fund assets have only grown by about 50%, and are expected to stop growing this year.

The expanding industry has issuers rushing to cut fees in hope of soaking up as much ETF market share as possible during this phase of rapid growth.

3. The Fiduciary Rule

Traditionally, ETF issuers used financial advisors as a sales funnel to retail clients. In this scenario, the financial advisor would develop a relationship with an ETF issuer, say BlackRock, and gain a thorough understanding of the products they offer, their structure, and their purpose in a client’s portfolio. Now, suppose the client asks for exposure to high-yield bonds. Their advisor would be more likely to recommend BlackRock’s $HYG, rather than Vanguard’s $VCLT which they know nothing about.

As a result of the sales funnel, the client often ended up purchasing ETFs from whichever issuer was most familiar to their financial advisor, regardless of the expense ratios. For mutual fund investors, the value chain was even more congested. “Soft dollar” arrangements allowed fund managers to artificially reduce their expense ratios by paying for services with order flow. As a result, many investors were paying hidden, undisclosed fees which ate into their returns.

Luckily for investors, this kickback scheme sparked an outrage that resulted in new regulation nicknamed “the fiduciary rule.” The fiduciary rule requires financial advisors to act in the best interest of their client at all times. In short, the fiduciary rule requires financial advisors to suggest low-fee products, and ETF issuers are dropping their fees in order to keep the advisor sales funnel alive.

Thanks to consumer-friendly regulations, an expanding industry, and the Walmart effect, the ETF price war is saving investors billions of dollars as the fees on their investments continue dropping towards zero.

Fintech News: January 6th, 2017

This week: how AI is being used in Wealth Management, customer data brings risks alongside opportunities, and what exactly is causing the up-and-down in Bitcoin price?

Beyond Robo-Advisors: How AI Could Rewire Wealth Management (American Banker)

Banks are moving past the simple robo-advisor in favor of more sophisticated models, which use artificial intelligence to scan market data and world events, identify new trends and use their knowledge to beat the markets when trading.

Customer Data is a Liability (American Banker)

Traditionally considered an asset, customer data is becoming a liability as more data increases the number of hackers looking to steal it.


The 2 Factors That Drove Bitcoin’s 20% Overnight Price Plunge (Forbes)

Earlier this week, Bitcoin prices reached all-time highs around $1,100. Since Wednesday, they’ve come crashing back down to the $900 range, representing a 20% loss. What caused the rally and subsequent decline? A large part of Bitcoin’s price is driven by China’s currency controls; when Chinese citizens expect a currency devaluation, they buy Bitcoin, then swap it back into other currencies. This week, the Yuan surprised Chinese citizens by strengthening, which brought Bitcoin’s price down.

While Bitcoin has historically been volatile, its usage as a currency is much higher than it was in 2013, when the price dropped 50% overnight. Because of this, the decline in price was much less dramatic this time around.

Fintech News: December 9th, 2016

This week in fintech: Transforming financial UX in 2017, a changing regulatory environment and what it means for financial advisors, the Fed expresses interest in Bitcoin and Blockchain:

10 UX Design Trends for 2017 (The Financial Brand)

As financial institutions become more customer-centric, their UX is becoming more important. Notably, UX in 2017 will be transformed by deeper understanding of financial psychology, mobile domination, increased personalization, and alternative UIs: think chatbots, intelligent assistants, and VR technology.

What Advisors Can Expect from Fintech Next Year (Investopedia)

In the last year, advisors have been scrambling to comply with fiduciary rules, using new tech solutions. Donald Trump has promised to dismantle Dodd-Frank and fiduciary rules, which requires all financial advisors to act in their clients’ best interests. However, FinTech continues to build solutions for advisors to become fiduciaries. Despite Trump’s promises, the overall long-term trend is still heading towards consumer protection.

Regtech thrives on change: welcoming Trump, Brexit and China (Daily Fintech)

RegTech, also known as FinTech’s homely cousin, is making back-office financial services more efficient, replacing old legacy infrastructure. In the US, less regulation will not necessarily mean less RegTech, since any change in existing laws opens up new opportunities and clients for RegTech solution providers.

Fed Outlines Approach to Monitoring Fintech (The Wall Street Journal)

On Monday, the Fed released research on the future of Fintech regulation. While it contained no firm policies, it underlined the need for more studies especially on Bitcoin and Blockchain.

Fintech News: December 2nd, 2016

This week: what the election means for Bitcoin, the promise of chatbots for fintech, and seven signs the industry is maturing:

How Trump Became Bitcoin’s Unlikely Savior (Payments Source)

Last year, as banks started using blockchain, the underlying technology of Bitcoin, it seemed like the currency’s spotlight was fading. Then, Trump was elected. His promises to close off cross-border remittances have caused new spikes in Bitcoin volumes and the price has rallied over 10% since election day.

Bracing for Seven Critical Changes as Fintech Matures (McKinsey)

As the fintech industry and its regulations mature, startups are becoming more cautious, forming more B2B partnerships, and consolidating by selling to larger incumbents. On the horizon, there will be lots of new opportunities as new digital ecosystems develop and the trove of customer information continues to grow rapidly.

Walk, Don’t Run, Toward the Fintech Bot Revolution (VentureBeat)

Finance executives are buzzing about Chatbots – but customers are not. Customers don’t want to talk to a bot, they want to be supported and helped with their needs. Right now, most bots are only able to do this with a highly specific expectations. Letting them operate outside these boundaries usually damages the customer satisfaction. So financial services should start small, by automating simple tasks with clear start and end points. As the bots’ underlying tech improves, they can allow them to take over more complex tasks.

Addicted to Stocks: Completing the Financial User Hook

In the past fifteen years, content for DIY investors has taken off. To continue growing into household names, these platforms must leverage behavioral science, using the methods of Facebook and Twitter to get users hooked on their platforms.

Free websites and mobile apps have democratized the stock market, giving DIY investors tools that were previously reserved for institutional investors at hedge funds and big banks. While the number of these platforms has skyrocketed, the market remains highly fragmented, with many smaller players struggling to grow. Yahoo! Finance remains one of the top resources for investors, thanks to its most important innovation: the “watchlist” feature, which keeps its millions of users sticky to the platform, some ten years after they built their first watchlist.

hooked.jpgSince 2005, hundreds of new content platforms have popped up, but none have managed to grow into household names. So why is there is no “Facebook of finance?” The answer involves a bit of behavioral science.

Right now, the #1 bestseller in product management is “Hooked: How to Build Habit-Forming Products.” It identifies the “hook” that gets users addicted to platforms like Facebook, Instagram and Pinterest, to the point where they check these sites as soon as they have a moment of free time. This simple feedback loop consists of four steps:

  1. Trigger: something that gets the user onto the platform
  2. Action: A user-initiated action that anticipates reward
  3. Variable reward: leaves the user wanting more
  4. Investment: a reason for the user to seek another trigger (Repeat cycle)

For any stock-market content, the hook looks more like this:


  1. Trigger: finding a stock they want to buy
  2. Action: buying that stock
  3. Variable reward: watching its value go up or down
  4. Investment: searching for a new winning stock (Repeat cycle)

The good news for financial publishers is that step three takes care of itself. Once the user buys a stock, its value is bound to go up or down and provide a variable reward. The bad news is that to take action, the user must leave the publisher platform complete a trade on their broker’s platform.

Because of this, the user subconsciously attributes both the action and the variable reward to their broker, even though the publisher provided the original trigger/trade idea. By requiring their users to take action on another platform, financial publishers are missing out on the full value of their content. Additionally, user departure severs the “hook,” deactivating the addicting feedback loop that leads 1/5th of the planet to log into Facebook every day.

To build a base of sticky & engaged users, financial publishers must reclaim the user hook with a bridge to action. By offering the ability for users to transact and manage their portfolios, financial publishers can become the one-stop-shop for stock market research, transactions and monitoring of returns. In other words, they can reclaim the Action and the Variable Reward, igniting the “hook” and building a base of users who can’t beat the urge to keep returning to their site.

Financial publishers work hard to create triggers. It’s time they use a bridge to action to finally get their users hooked.

Fintech News: November 25th, 2016

Fintech this week: Data privacy is already an illusion, the fate of a maturing robo-advisor market, and the dangers & benefits of wide-scale passive index investing. Happy Thanksgiving!

Is Indexing Worse than Marxism? (The Wall Street Journal, Op-ed)

As investor money flows from active to passively managed funds, fund managers warn of the dangers of widespread index investing, where individuals invest in companies because they’re part of an index, not because they see strong growth and profitability in them. This columnist disagrees, and with active traders growing as well prices are still determined by company fundamentals.

2016 Will be Remembered as the Year When Data Privacy Was Killed (Let’s Talk Payments)

Three of the largest US tech companies know basically everything about you. Will 2016 mark the end of data privacy, or is it already dead?

What We Learned About Robo Advisors in the Last 19 Months (Let’s Talk Payments)

As the robo-advisor market matures, it faces new growing pains and new opportunities. The industry’s narrative has changed too, as more incumbent wealth management companies have built their own robo-advisors. Despite huge growth, robo-advisors continue to struggle with high acquisition costs and a client base that has little money to invest.

Fintech News: November 18th, 2016

The Next Generation of Hedge Fund Stars: Data-Crunching Computers (The New York Times)

The future of hedge funds isn’t the billionaire stock picker like George Soros or Carl Icahn, it’s a supercomputer guided by mathematical trading equations. The industry is witnessing a split, with some funds moving to long-term performance strategies and others embracing quantitative strategies. For example, BlackRock’s quant trading arm uses satellite images of China’s largest construction projects to trade their real estate market.

Wells Fargo makes move into robo-advisor market (Financial Times)

Wells Fargo has joined other incumbent firms in creating its own robo-advisor product, through a white-label with SigFig, one of the original robo-advisor startups. Experts say it will restore trust for the company, since algorithms rarely create fake accounts and PIN numbers.


Three market opportunities in Insurance Asset Management (Daily Fintech)

New opportunities arise where WealthTech and InsurTech overlap.