Will trade become a basic banking service?

[AVIS D’EXPERT] The pandemic has caused a massive influx of new traders. But it is not necessarily the banks that benefit. Decryption with our expert Guillaume Almeras, founder of the monitoring and advice site Score Advisor.

A few months ago, Lydia, the French fintech first known for its people-to-people payment service, launched a commerce solution. This contributes to expanding its offer: a payment card, a current account, savings and credit and now the possibility to invest in stocks, cryptos or precious metals. This from €1, without having to download a specific application or open a securities account, at the price of an advantageous commission.

Lydia thus democratizes commerce, and in France such an offer remains quite unique (essentially challenged by other fintechs). However, other examples have emerged elsewhere, such as in the US with Citi Self Invest. And the question is whether this approach is not destined to become widespread, with trading becoming a basic banking offer, linked to the provision of a current account. This would only respond to the fact that trading is becoming an increasingly common activity, especially among younger people.

Massive arrival of new investors

The turning point came with the health crisis. Especially in the United States, where during the lockdown many new investors appeared on the stock market, often very young, and many thus used the stimulus check that the government distributed to 70 million Americans. They were called “Robinhoods”, from the name of the online platform, created in 2013, which was the first to democratize trading, making it as simple as possible and free.

Thus, Robinhood has attracted investors to the exchange without experience, without knowledge, and many of them have quickly fallen into the hands of outspoken manipulators who claim to be market experts on social networks. The SEC, America’s stock market policeman, ended up investigating the phenomenon, and the press widely reported the suicide of a young speculator who mistakenly believed he was in debt of a million dollars after an options trade he misunderstood.

After all, due to its success, Robinhood has, if not imposed free trade everywhere, at least forced the historical establishments in the United States to seriously lower their prices. However, this issue of gratuity is not significant. In many countries, a real demand has arisen and new behaviors have emerged. In France, 400,000 people bought shares in 2020 for the first time or for the first time in many years. In total, share purchases by individuals have quadrupled.

Very quickly, a few companies that noticed this trend tried to help it find more meaning: Merrill, thus by offering to guide investment choices or Belfius through an orientation on social and environmental responsibility. But most banks remain wait-and-see, if not downright embarrassed.

Decisive influence of online games

Robinhood has been widely criticized for not doing enough financial education with the investors, often novices, who use its services. But the financial education that financial institutions generally provide – which teaches you to manage your money wisely and to be content with what you have – is precisely what more and more people, especially the youngest, do not want to hear anymore!

They want to be active, diversify their sources of information, try their luck and, for some, further assert their beliefs. It looks like a game, but make no mistake, it’s actually a way of life. The decisive influence of online games, on the other hand, is felt in the fact that complexity does not postpone (cryptos benefit from this) when the experience is shared in a community.

All in all, a rather strange phenomenon intervened during the health crisis, which we greatly miss seeing again: For many, the economy could arouse a certain jubilation. It is therefore difficult to keep spouting the old advice of being a good father when his clients are wondering how to make a fortune with a few clicks. However, good advice seems more necessary than ever to prevent many from being ripped off. This still needs to come into the game. To develop offers that respond to a new trend: financial advice must now contain a dimension of excitement. Comprehensive program.

By Guillaume Almeras, founder of the monitoring and advice site Score Advisor

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