In February this year the now ex-London Mayor Boris Johnson invited the UK’s most ambitious fintech companies to a 5-day networking and knowledge-sharing mission to Boston and New York. The trip was part of the Mayor’s Export Programme aimed at showcasing British technology and the impact of digital disruption on the global economy.
More recently, a study by Accenture reported that global investments in fintech hit $5.3 billion in the first quarter of 2016 which is an indication of the potential growth in an industry which many commentators predict will revolutionise the way the global economy lends, invests and saves its money.
This explosive growth in the fintech industry has until recently been confined to the U.S and European markets, but earlier this year China’s flagship fintech company, Ant Financial, completed a huge $4.5 billion raise bringing its valuation up to an impressive $60 billion. Further proof that the budding fintech sector is a truly global movement and one which could bring billions of people from poorer nations into the global economy. Indeed, a list of the world’s most exciting fintech innovators reveals a diverse, international mix of companies offering financial services which tap in to local economies.
Perhaps the most exciting of this new-breed of fintech startups is Robinhood, the new brokerage app being held aloft as one of the most disruptive products to enter the financial services industry.
Robinhood began as an idea between two Stanford graduates that a tech-driven brokerage system could ‘cut out the fat’ that makes traditional brokerages and trading platforms costly and inefficient.
It is the brainchild of Stanford roomies Vladimir Tenev and Baiju Bhatt, two graduates who worked on trading platforms for some of the world’s most recognisable financial institutions. As is the way with the majority of today’s most disruptive technologies, the pair quickly realized the financial services industry in which they operated was bloated with inefficiencies, unnecessary middle men and legacy processes – most notably the fact that electronic trading firms were paying next to nothing to place trades in the marketplace and yet were passing a $10 charge on to investors for each trade – good for traditional brokerages, but galling for the end consumer. It was on the back of this that the idea for Robinhood was conceived.
The Palo Alto-based company is now being heralded as one of the most exciting fintech startups in the world and looks set to redefine how we trade stocks by democratizing the trading process. They recently announced plans to expand internationally, noting that with Robinhood, users will be able to buy and sell US listed companies, EFTs, and many of the largest companies across the globe.
By removing the added costs of traditional brokerages – the cost of storefront locations, account management and administration, etc – Robinhood has been able to operate with significantly less overheads and pass these savings on to the end consumer to ensure trade in stocks and shares is free. Robinhood makes ends meet by collecting interest from users who choose to upgrade their account and also from interest accrued by uninvested cash balances.
The financial services industry, and in particular the trading and investment sector, has thus far managed to stave off digital disruption, but with the introduction of apps like Robinhood, trading in stocks and shares may soon just be a few taps of our smartphone away.