FinTech News: December 29th, 2015

Did you keep up with FinTech news this Christmas? Here are last week’s highlights:

Securities and Exchange Commission; SEC

Photo by Andrew Harnik. Source: Wired

Another step forward for blockchain: Overstock.com has been cleared to issue company stock via Bitcoin’s Blockchain. Is Blockchain the future of investing? It’s likely too early to say. Read more at Wired.

 

Active vs. Passive Investing: Which is right for you? Passive investing generally has lower fees, but guarantees you’ll never beat the market. Active investing gives investors more control, but can rev up their market anxieties. Read more at CNBC.

 

Some nerdier reads from Academia: The top 10 digital news and social media research of 2015. On the list: Political “Echo Chambers” on Twitter, how metrics drive work culture, optimizing UI design, and more. Read more at Nieman Lab.

 

BI’s Latest FinTech report: Different challenges for banks and startups, the blockchain wildcard, and more. Full report can be purchased 567310f02340f894008b676b.jpegat Business Insider.

 

FinTech 2015 in review: APIs, Investing as a service, selfie-pay, robo-advisors, and more. Read more at Finance Magnates.

 

Check back next week for our first news update of 2016. Happy New Year

FinTech News: December 18th, 2015

Stay up to date with FinTech news. Here are this week’s highlights:

 

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FinTech Innovators released The FinTech 100 this week. These familiar faces made the cut: Wealthfront, Betterment, Motif, RobinHood, eToro, Nutmeg, Estimize. Shoutout to our friends at SimplyWall.St!

 

Finovate Fundings: 30 Companies, $100 Million. In Investing: Trizic helps RIAs compete with roboadvisors, Income& creates low risk, high yield mortgage backed securities.

 

Fees: another area where online investing and e-retail see similar trends. Forbes: The End of Fees? Lessons from Amazon for FinTech Startups

 

Drama at Vanguard: discrimination, taxes, angry employees, etc. The Street: Vanguard is Popular with its Investors but not all its Employees

 

Weekend Read: takes a historical look at FinTech since the 1950’s and contextualizes the role that banks play today. Forbes: The Evolution of FinTech

The Future of The $Cash Tag: Big Money in Social Investing

The unkept promise of Twitter’s “cashtag” feature has opened an opportunity for TradeIt to provide a frictionless social investing experience to followers of the platform’s leading financial influencers.

The cashtag came to Twitter in 2012, enabling its users to see stock results by typing a dollar sign, followed by its ticker symbol. Instead of searching #Apple and filtering through endless tweets about the latest iPhone, the idea was that social investors could search $AAPL and enjoy search results that analyze the company from an investor’s perspective. At first glance, the cashtag, which generates 100 million daily impressions, seems like the perfect feature for Twitter to leverage itself in the social investing world.

Twitter’s Late Entry to Finance

Unfortunately for Twitter, social investing was not a new concept in 2012. StockTwits, one of the most successful social investing platforms, has raised about $9 million in venture funding, and had already been using $TICKER tags for the same purpose since 2008. After Twitter launched the cashtag, StockTwits CEO Howard Lindzon accused Twitter of “hijacking” his company’s technology. In a blog post, he asserted that Twitter’s problems would detract from its competitiveness in social investing. Specifically, he stressed the importance of his curation and spam filtering features, something Twitter might be too distracted to implement. He said, “you can hijack a plane, but it does not mean you know how to fly it.”

Three years later, it appears Lindzon was right. StockTwits has grown from about 300,000 to 580,000 monthly users, while on Twitter, clicking on a cashtag still bombards users with a feed of tweets about the company that is largely just noise. Cashtag feeds are also clogged with so many pennystock promotions that some have spam rates of up to 99.7%.

Top 5 pie chart

Top 5 $Cash Tags, Fall 2015

For investors, searching a cashtag is almost useless for making a trade decision. Investors use social networks to gauge popular sentiment on the stock and read observations on its past performance record. Without providing digestible information on a company or stock, the cashtag becomes a mere novelty, with no additional utility over its hashtag counterpart.

The Opportunity: Seamless Investing

While Twitter might never be as innovative as other apps that focus exclusively on investing, it does have some clear advantages over these smaller players. Most importantly, it has built a reputation as a platform for breaking news—a place you go to find out what is happening right now. In the trading community, where a fraction of a second can change everything, this is an important loyalty. Further, the sheer size of the network gives users free reign to choose which accounts they follow and take advice from. Everyone has their owninvesting strategy, and any information they might want is likely available on Twitter. With these advantages, Twitter is ready to position itself as a major player in social investing. However, this won’t happen unless it develops new capabilities for the cashtag.

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This opportunity comes at a crucial time for Twitter, which continues to disappoint its investors as it struggles to add and hold on to new users. The company recently made headlines when it laid off 8% of its workforce, with some speculating that it is on the decline. Analysts have said that as social media shifts away from text and towards images, it is only a matter of time until Twitter is largely obsolete. This is an oversimplification. Some information is perfect for Twitter because it is non-visual and “unsexy,” yet shareable. I think it’s safe to place investing advice in this category, as I doubt people are planning to track their stocks on Instagram.

The most popular cashtags on Twitter, which include $AAPL, $GOOG and $GE, are reaching millions of daily impressions, and can spike the moment one of their stocks behaves erratically. In the past few months, we have tracked the most influential users of the top 45 cashtags, who tend to fall into one of two categories: financial news providers and stock tip providers. The news provider category is made up of news agencies and their editors, like @CarlQuintanilla or @CNBC. These accounts typically have high follower counts and act as an informational, rather than instructional, resource for traders.

The second category of influencers is made up of individual investors and traders who share specific stock trade ideas, usually with an accompanying disclaimer releasing them from liability. Many of these accounts are individuals who have made a hobby out of day trading, some are professionals on Wall Street, and others, like @JustinPulitzer, have managed to make a living by providing stock tips to their followers. Unable to make money directly from Twitter, many of these influencers have their own personal websites where they sell their stock picks for a subscription fee.

Untapped Gold

This pocket of retail investors is untapped gold for Twitter, as these accounts provide advice that often leads to direct financial gain. In the current situation, nobody is satisfied: influencers resort to outside resources to gain subscribers, Twitter is making no money, and followers either pay for subscriptions or are restricted to free accounts. This inefficient system is maintained because Twitter is a free service acting as a distributor of highly valuable information.

Of course, Twitter has always been free, and will remain so. However, it has the potential to incorporate new services that keep its users in the app for longer, increase advertising revenue, and reward stock picking accounts when their followers follow their advice. At TradeIt, we are determined to build products that make investing easier, and one of our strategies is to identify the spaces where investors make their decisions (news apps, social media) and make it possible for them to trade within those spaces. Right now, we seek to eliminate the inconvenient journey between publishers (customer reviews) and brokers (the shopping cart) that retail investors experience.

With this goal in mind, we are rolling out the TradeIt Influencer Outreach Program, which is designed to work with top cashtag users to build a frictionless trading experience for their followers. We believe in connecting with these influencers at the ground level, providing them with customer assistance and listening to their wants and needs as we continue to develop products that transform the online trading community. If Twitter won’t develop adequate trading features from the top-down, it seems like we will have to do it from the bottom-up.