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The rise of the digital retail investor: An industry perspective

In the wake of a global pandemic, the industry is seeing a huge appetite for digital investment products.

Whether you’re a financial institution that caters to mass affluent segments to help manage wealth digitally, or you’re looking for ways to appeal to a generally more tech-savvy consumer, the industry must open its eyes to the huge opportunity afforded by this influx of digital retail investors.

We recently hosted a webinar to discuss the changing market, the evolution of customer demand and how the industry can meet clients’ needs in an increasingly virtual consumer landscape.

Our recent webinar saw speakers from Monument Bank, Vacuumlabs, and The Rudin Group, and our own Head of Partnerships and Strategy, Nikolai Hack, come together to discuss the macro factors driving the rise of retail demand for investing, how institutions are responding, and how we can seize the opportunity.

Don’t worry if you missed the webinar; you can catch up here or we’ve highlighted some of the key takeaways below.

Customer demand & the big market shift

With an unprecedented rise in uptake of trading apps such as Robinhood and neo banks such as Revolut, it’s become clear that consumers have embraced the power of digital money management in recent years. But with environmental factors such as the Covid-19 pandemic playing a key role, the panel  explored what this means for the different market segments and how we can continue the momentum. With consumers becoming more tech-savvy across the board, age-specific segmentation becomes less distinct, and banks look to target a mass affluent demographic that has historically been overlooked.

“We’re seeing a genuine democratisation of the capital markets. The reach is becoming much greater, and cost points are coming down. We’re also seeing more self-directed activity; people are getting smarter. Monument is very focused on the mass affluent audience, people that are below ultra-high net worth and above retail.

"The mass affluent, I believe, are the largest overlooked and underserved opportunity in the world of financial services today. In the UK, it’s half of the wealth.

“Pre-pandemic, I would have said the [mass affluent] demographic was probably 35 to 65. During the pandemic I think it’s probably broadened dramatically. I think everybody has become much more comfortable with a digital-first offering. I would say the demographic is more defined by aspirational time-poor wealth-generating-oriented individuals.”

Mintoo Bhandari, Founder & Managing Director of Monument

Defining the key drivers

Whether it’s through automated investing, hybrid propositions or self-serve trading, customers now expect to be able to tap into these digital investing services. Banks and other financial institutions need to recognise the driving factors that have led to an increasingly astute new generation of digital investors before we understand how to optimise the opportunity.

“I think upfront it’s worth recognising that there are some common drivers. But there are also significantly different drivers for each segment of the market. It’s worth drawing a distinction between saving, investment, and trading because they’re three very different beasts.

“With trading, and the influx of new customers into the low-cost online trading apps, particularly amongst the younger generations, I think there’s a real element of excitement, and that’s being driven by social media, by peer group influence.

“If we look today at the combination of a low cash-yield environment globally, booming equity markets globally, much more widely available education on investing and a far greater choice of channels to market, ultimately that’s driving the conversion of savers to become investors.”
Nigel Sirett, Head of Digital Banking at Vacuumlabs

Responding to the opportunity

Whether it’s helping customers save for their retirement, a holiday next year or a new home in five-years’ time, banks must tap into these customer-specific goals and more emotive drivers for money management success. With different aspects of consumer finance still pinned into silos, the industry has created a barrier, blocking the true customisation and personalisation that today’s consumers yearn for. Breaking down these silos could be the key to generating revenue from your existing client base.

“You need to break down the silos. We tend to differentiate between these different products: pensions, saving, investing, trading. We look at those differently because they’re differently regulated, they have different revenue streams, and they sit in different departments of the bank. But to the end consumer, there’s very little difference; it’s all money management.”

“If you’re able to build a proposition that can capture these different streams and ideally be fluid between them, with one offering, that’s the ideal way. For the average retail institution out there, they have these people as their customers already, and  they look towards their bank, an established institution, for guidance. The opportunity is there, you just have to find the trigger that will engage customers to become active in other propositions like investing.”

“The differentiation, if you want to be active in this space, does not lie in building this technology yourself. The technology is the foundation without which none of this works, but the financial firm’s advantage lies somewhere else, it’s in the distribution network, thebrand, or the way that they're able to build relationships with customers . If you’re able to leverage those assets, then you can build very successful propositions and engage customers for a very long timeframe as well.”

Nikolai Hack, Head of Partnerships and Strategy at Nucoro

As financial institutions prepare to satisfy the new set of consumer needs in a post-pandemic future, many must be aware of the opportunity of converting savers into investors to help generate revenue for the long term as well as meet customer expectations. As analysis shows that only 20% of Europe’s top 30 banks guide their customers from saving to investing in a seamless journey, it’s time for the industry to open its eyes to the opportunities and learn how to streamline that journey by making use of technology partnerships to enable a quickly deployable, scalable and highly automated solution.

For more details on guiding your savings customers and bridging that gap, download our recent research: The 2021 Saving into Investment Benchmark.

Key Ideas

  • Commission-free trading apps and spare cash as a result of the pandemic have fuelled a growth in digital retail investing
  • Banks can tap into this growth by offering their customers saving, trading and investing propositions that help make more of their money