FinTech News: March 24th, 2017

This week, lots of drama in the cryptocurrency world: Bitcoin’s community could split the currency, Ethereum continues surging, as governments debate over who regulates fintech. By the way, what is Ethereum?

Bitcoin Price Plunges on Fears of a Currency Split (The Wall Street Journal)

bitcoin-and-ethereum-sitting-on-a-tree@2xThe bitcoin developer community is divided over block size limits, and it’s threatening to split the currency in two. Unlike the volatility that followed Bitcoin’s ETF rejection, this debate carries fundamental implications for the cryptocurrency’s future. A permanent, definitive record of every transaction is central to Bitcoin’s value proposition, so splitting this history into two will cause uncertainty and could provide liquidity problems. Bitcoin price has hovered around $1000 all week, down from its previous highs around $1250.

New York Grants Coinbase License to Trade Ethereum (Fortune)

Ethereum, the current leader of “altcoin” currencies, has been unavailable to investors in New York. This week, the state legislature granted Coinbase a license to provide Ethereum,  and criticized the OCC’s encroachment on fintech reculation. The debate continues over who is best equipped to regulate fintech – states or the federal govermnent.

What is Ethereum, and Could it Actually Replace Bitcoin? (Mashable)

Ethereum 101: what is it, and why are people suddenly talking about it? It’s a nerdier and slightly more complicated version of Bitcoin – and some companies are getting behind it. It’s up 200% in the past month. Get the overview here.

 

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!

Fintech News: March 17th, 2017

This week: the Bitcoin ETF was rejected last Friday, and alternative cryptocurrencies are rallying, China’s winner-takes-all fintech market, and $SNAP’s IPO could encourage private unicorns to make the jump and go public.

Ethereum Price Tear Continues Setting All Time Highs (CoinDesk)

Ethereum, a bitcoin alternative, rallied 230% this week. The cryptocurrency’s main feature is “Smart Contracts,” which automatically execute when the conditions are met. That’s obviously useful for businesses, and JP Morgan, Intel, and Microsoft are experimenting with it. This week, it rallied from $15 to a peak of $50 as speculators questioned Bitcoin’s ability to remain the dominant cryptocurrency.

Alibaba, Tencent to Get Most of China Fintech (Investopedia)

The Chinese fintech market is predicted to grow to $67 Billion by 2020, and it appears the giant tech companies are going to reap most of the profits.

Snapchat Means IPO Ice Age is About to End (Forbes)

The most valuable private tech companies in the country – Airbnb, Uber, etc – have avoided IPOs at all costs for the past few years. Now, Snapchat’s (relative) success could encourage them to change course and go public.

Fintech News: March 10th, 2017

This week in Fintech: 72 hours until the Bitcoin ETF decision, and discrimination in online lending practices.

Bitcoin May Go Boom if SEC Approves Winklevoss ETF (Fortune Tech)

The Winklevoss twins filed their Bitcoin ETF application four years ago. The SEC’s decision on whether or not to approve it is due Monday the 13th. The decision has huge implications for mainstream adoption of blockchain technologies, beyond illegal transactions and funneling assets out of China. In the short term, Bitcoin price is shooting up from speculation. Stay tuned.

Is it OK for lending algorithms to favor Ivy League schools? (American Banker)

While fintech companies often claim to be more inclusive, online lending algos are drawing criticism for favoring Ivy League graduates. Recent research shows that less prestigious institutions outpace the Ivy League, when it comes to getting poor kids into the 1% in their adult careers. In short, there is still room for debate over which assumptions should govern alternative lending.

 

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.

Fintech News: March 3rd, 2017

This week, the ripple effects of dropping fees in the wealth management industry, and a robo-advisor just for Asian-Americans.

The Asset Management Pressure Cooker (Bloomberg)

As money continues moving to low-fee, passively managed funds, BlackRock, Fidelity and Vanguard are seeing assets soar to new highs. But the revenue that fund managers generate per dollar is falling, putting pressure on the securities industry to rethink the way they do business.

Ex-Scottrade execs see Asian-American, Chinese market ripe for robo advice (Financial Planning)

As robo-advisors have grown in popularity, new entrants have started marketing them to specific demographics, such as Ellevest for women, and FinHabits, for Latin Americans. Now, Scottrade execs are forming a robo for the Asian-American community in LA and NY.

E*Trade is the Latest Entrant in the Online Broker Price War (Yahoo! Finance)

After remaining silent as its rivals, Schwab, TD and Fidelity slashed fees, E*Trade joined the race by dropping its trading fee from $9.99 to $6.95.