Posted Nov 25, 2021, 7:00 AM
Very intuitive applications, attractive prices, registration in a few minutes, polished marketing… this is the recipe for recent trading applications. Their objective: to dust off investment in the stock market and make it accessible to all.
Among these new brokers, the Dutch scale-up Bux, founded in 2014. Its Bux Zero application, available in France since the summer of 2020, allows you to buy shares and invest in index funds (ETFs) that replicate stock market indices. To attract users, the fintech puts forward several arguments: no minimum investment, no commission (under certain conditions) and a random free action “of a maximum value of 200 euros” offered to new users. And the new registrant who sponsors another receives an additional free share.
In the same vein, Trade Republic, a fintech launched in Germany in 2019 and arriving in France in January 2021. It charges 1 euro in fees for each transaction, regardless of the amount. Another player to have made a name for itself on the market: Degiroa Dutch start-up born in 2008 which entered the French market in 2014.
On the French side, the start-up Lydia, which began in 2013 by offering a payment solution between individuals, launched its trading offer in November. Another young tricolor shoot to have made a name for itself: Mon Petit Placement, born in 2017. Minimum investment on the platform: 300 euros, which will be reinjected into a combination of assets, such as “equities, government bonds, commodities”.
All these fintechs dream of surfing on the appetite of new investors and experiencing the same success as robinhoodthe flagship app for young American stockbrokers (not yet available in France), which went public on the Nasdaq last July.
“The illusion that investing is a game”
Since the 2010s, stock market investment applications have flourished. “By simplifying customer journeys, they help attract new, younger investors”, observes Claire Castanet, director of relations with savers at the Autorité des marchés financiers (AMF). In March 2021, those under 35 represented 18% of share holders, compared to 11% two years earlier, according to a study by Kantar for the AMF.
Claire Castanet is delighted with this rejuvenation, but warns: “The new applications rely on gamification. Their very playful interfaces can give the illusion that investing is a game.”
For her, it is essential to keep in mind that the money invested can be lost. She also recommends asking about fees. “Many platforms attract customers by saying ‘zero commission’. We have to be able to understand how they are remunerated, because placing orders necessarily has a cost for them”she points out.
Another piece of advice: ask yourself about the product in which you are investing. Some apps offer shares, others fractional shares, derivative products such as CFDs (contract for difference), etc. “It’s not always clearly indicated, she regrets. However, they are not at all the same things. If you own a stock, you are entitled to dividends. This is not the case with CFDs, which only consist of speculating on the rise or fall of the share price. With leverage, you can sometimes lose a lot more than you invested. »
According to her, the new trading applications have an interest: “Allow people who are coming into contact with the stock market for the first time to invest small sums to learn and build up a stock market culture. » Because the stockbrokers do not master all the rules of the financial markets.
In 2020, the AMF mediator, which offers amicable resolution of financial disputes, received five times more requests than in 2019 concerning problems executing stock market orders. “In most cases, the providers were not involved. Individuals simply did not fully understand the type of orders they had placed”analyzes Claire Castanet.
Start trading from your couch
For Estelle Brack, economist and founder of the strategy consulting firm KiraliT, we are a long way from the time when those who wanted to invest in the stock market “went through their bank’s account manager, who provided them with the advice he had received from his ‘market’ department to buy financial securities”.
Now, anyone who wants to start trading can do so from their couch. He “can make their own arbitrations, personalize their investments, follow the advice of experts from the trading platform they have chosen, follow their own analyzes or those of robo-advisors”explains Estelle Brack.
Robo-advisors, what? Online platforms that use algorithms to issue financial advice and make investments automatically. Among the recent players in this sector, the French company Nalo and the platform birdeeboth launched in 2017.
Another tool available to neo-boursicoteurs: “social” trading, which allows amateurs to copy what successful traders do. The world leader is eToroan Israeli platform born in 2007. Again, some call for caution. “Seeing the performance of successful traders prompts some investors to take on more risk than expected in the hope of achieving returns like theirs”observes Marc Desban, lecturer in market finance at the University of Paris-Est Créteil.
To attract as many users as possible, some applications offer at the same time to invest in cryptocurrencies. This is the case of Robinhood, Lydia and eToro. With, always, the same recipe: simple navigation and skilful communication.
But in recent weeks, Robinhood has hit the headlines. The American company has announced that it suffered a data leak that exposed the information of 7 million customers. Its third quarter 2021 results were disappointing, with declining active user numbers. Result: the stock fell below its IPO price. Does this reversal signal the end of good times for trading apps? Not in Europe, anyway, according to Marc Desban: “These platforms are becoming more democratic and have not yet reached their maturity phase. »