Q1 FinTech Boom Wakes Electronic Traders Up
Platform technology among the retail trading industry has been a great point of importance that has been laboured for many years.
Despite the vast majority of retail brokerages around the world relying on outsourcing their entire trading environment including their client bases to third party platform companies which are affiliate marketing focused, hence over 1300 almost identical ‘brokerages’ existing worldwide with very little differentiation or flexibility in product ranges, and equally little ability to invest in important features for their clients.
In short, brokers which do not have their own trading infrastructure which has been designed, supported and operated in house are unable to provide a fully comprehensive multi-asset trading environment, nor able to tailor their product toward the suitability of their client base.
This may well be an age-old conundrum, however as the fiscal results for many industries become known for the first quarter of 2021, it has become more important.
London-based independent body Innovate Finance, which represents the financial technology (FinTech) industry has released figures which show an astonishing 331% increase in the investment in FinTech in the United Kingdom compared to the same period last year.
Indeed, the first three months of 2021 saw British FinTech companies attract 69% of the total amount of investment in the FinTech sector across all of 2020.
The record $2.9 billion was invested across 117 deals, with extremely high amounts going to Checkout.com ($450 million), Starling Bank ($376 million), Rapyd ($300 million) and PPRO Financial ($180 million initially, then $90 million).
What does it matter if stratospheric amounts are being thrown at new, attention-grabbing and cleverly marketed self-styled disruptors? Surely they are not relevant in our long-established and mature world of retail electronic trading?
We have been around since the late 1960s, and I personally have enjoyed three decades in the industry, therefore, we are hectored and hackneyed, aren’t we? Surely these relative newcomers should be viewed as expensive follies. A triumph of marketing over substance. The flavor of the moment.
Surely they’ll consume their enormous investment and move on, whilst we continue to mature like a good French wine?
As with many innovators that have caught the attention of the clever money, we will only find that out later on in life and reflect on either its flourishing or demise having gained wisdom, however there is a more important point here, that being the actual focus of those whose interest is being attracted: The ownership of an end-to-end electronic financial product. Some actual intellectual property for auditors to value, and something of substance to offer an astute, and potentially loyal client base.
Apple, a dominant company which for over a decade has been widely regarded as far more than just a manufacturer of cellular mobile telephones and is a lifestyle in itself.
This exemplifies an important matter when it comes to changing an entire industry and then owning it. Apple could have come along in the mid-2000s and said “Do you want to buy a phone?”
People across the world would have simply said no, and that they’ve already got one. Add to that the price tag, which was several times higher than the existing mobile phones that everyone had become accustomed to, and surely the Apple phones would have fizzled away within a matter of weeks.
They didn’t, however. They flourished and continue to flourish to this day. Loyal Apple customers use their hardware and software, and cost is rarely even considered.
That is because people who bought into it did so because of why it is made, not because of what it does.
Apple didn’t bring the iPhone onto the market as a phone. It positioned it as a whole new world of opportunities only available to its customers, and here we are a decade and a half later and Apple’s customer base is organic, loyal and completely invested.
Brokers which rely on affiliate marketing and treat clients as ‘leads’ before sending them off to an equally affiliate marketing orientated third party supplier of very generic and rudimentary software cannot be classified as FinTech companies, have no intellectual property and are unable to offer their clients any form of quality customer experience.
There has been a lot of discussion about differentiation and the need to offer unique and interesting user experience for traders, and a comprehensive infrastructure so that brokers can genuinely work with their clients on a long term basis, yet very few brokerages have actually gone down the route of being an actual FinTech company in their own right as well as a brokerage.
There are literally only a handful of such companies worldwide, which in such a vast, global and liquid market is lamentable.
CoinMetro is ahead of this game for many reasons and especially that has its own trading infrastructure and commits to providing a long term, sustainable and evolutionary trading environment for its clients.
The huge investment in FinTech firms over the first three months of 2021 is an indicator that the electronic trading industry needs to also major on FinTech development.
We are, after all, a technologically-led industry. Being a master of one’s own destiny is vital. Thus, simply outsourcing ‘leads’ to affiliate platforms is tantamount to not being part of a genuine electronic trading financial technology industry.