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Protocol | Fintech

Consumers can buy stocks everywhere. Is that a good thing?

Amid a bull market, many financial apps have added stock-trading features in hopes of drawing in new investors.

Square's Cash App is among many banking and payments apps that have added investing features.​

Square's Cash App is among many banking and payments apps that have added investing features.

Photo: Tech Daily/Unsplash

Retail investing is taking off in the U.S., with daily trading volume in January double what it was a year ago and much of the increase attributable to individual investors.

It's more than just the Robinhood effect: A number of companies are making it easy to tack on investing alongside other financial services, and a broader range of apps now feature stock trading as a result.

The spread of stock trading in apps originally designed for borrowing, saving or paying has big implications. It could lure more people back into the stock market: The percentage of households owning stocks dropped after the dot-com bust and the 2008 financial crisis, and has only recently started to recover. That, in turn, has meant that the stock market's gains in recent years have only benefited some families.

But just adding a "buy stocks" button to an app won't reverse years of worsening income inequality by itself. Easy access to the markets could hurt some novice traders if apps lure them into risky, rapid-fire trading.

For startups looking to challenge the finance establishment, one-stop shopping is another way to attract customers and keep them once they're there with more options to save or invest.

Square's Cash App lets people get paid back by a friend for beers, and then turn around and plow it into shares of BUD. People who use Revolut or MoneyLion for banking can move money from savings into investing. Stash even offers a Stock-Back Card that pays customers for shopping with fractional shares of the retailers they frequent. Several apps promise free stock, often in familiar brand names, for making your first trade.

Online brokers have often marketed themselves to people who are already trading. Apps where trading is an add-on are more often trying to attract customers who are new to the markets.

"There's a big paradigm shift from a brokerage mentality to an embedded finance mentality," said Bob Cortright, CEO of DriveWealth, which has 90 partners with close to 10 million accounts, including Revolut, MoneyLion and Square.

Time for investing

There are arguments for getting consumers started with investing sooner. Starting to invest while people are young can compound into much larger savings in the future. Especially if consumers invest for the long term — and avoid cycling in and out of stocks in search of short-term profits — these relatively small investments can turn into much larger retirement savings over time.

Younger Americans targeted by many of these apps generally invest less, said Brian Graham, a partner at Klaros Group. That's in part because they have less money to save: Wages stagnated after the 2007-2008 financial crisis and student loan debt has skyrocketed.

"We see this whole divide and accessibility problem," said Yoshi Yokokawa, CEO of Alpaca, which provides trading services for financial apps.

It's not clear how many users of these apps are new to investing. More than 2.5 million customers have bought stocks using the Cash App in the 10 months since launch, Square said in its third-quarter 2020 earnings report. Many of those users originally came to the app for peer-to-peer payments. Square now includes dollar-cost averaging options to address market volatility.

With features such as gamification, hyper-targeted customer segmentation and low or no trading fees, embedded investing in financial apps should draw more first-time investors, but there is a danger if apps focus on short-term trading, not longer-term investing, Klaros' Graham said.

"It'll expose people to financial services in a more integrated way. It has enormous potential to do good. It also has enormous potential to do bad," he said.

"A very small portion of American society actually invests in assets. Our customer base has historically been left out," said Dee Choubey, CEO of MoneyLion, whose customers mostly make between $50,000 and $100,000 a year. "Our mission is to create financial access."

Moving money

Smashing banking and brokerage services together isn't a new idea. Following passage of the Gramm-Leach-Bliley Act in 1999, brokers and banks literally merged. Citigroup emerged from the $70 billion combination of Travelers, Salomon Smith Barney and Citibank, while E-Trade bought Telebanc for $1.8 billion. At the same time, the dot-com boom lured retail investors into the market to trade online.

What's different now is that you don't need billion-dollar deals to put banking and brokerage services together. All you need is an API that can route trades from an app to the market. Companies such as DriveWealth, Alpaca and Parkside offer backend trading services for a variety of customers.

Now, there's renewed retail interest in investing with a bull market that roared back after the pandemic crash last year, and low interest rates often don't provide meaningful savings. All-in-one financial apps make moving cash and buying stocks as easy as ordering an Uber — not something that requires expertise or even downloading a separate app.

Some companies offer education for new investors. MoneyLion asks for a customer's financial goals and provides a caution flag if they seek to invest in something that is outside of their risk profile. Square has a digital "My First Stock" slideshow complete with sharks and crocodiles to illustrate risk. Robinhood bought MarketSnacks, a financial media company, in 2019, and now calls it Robinhood Snacks.

Some, following Robinhood's lead, offer commission-free trading, while others like MoneyLion offer managed baskets of stocks for a fee. "It's philosophically different than stock trading apps out there," MoneyLion's Choubey said. "Our customers start out with $1,000 to $10,000 of investable assets. To start off you really should probably not be buying a fraction of a single stock of GameStop. You really should start in a managed way with your goals."

Others use card rewards to get consumers interested in stocks. Stash customers have earned about 25 million stock rewards via the Stock-Back Card, the company says. And 35% of customers who received a stock through the card later invested their own cash in that company. Stash spokeswoman Vera Hanson calls the program a "gateway for customers to explore and discover new investments."

But the common theme is that placing stock-purchasing next to other financial products such as banking or lending is a way to drive increasing interest in investing.

"That consumer behavior is tied to the investment behavior," Cortright said. "It's a way to get young people thinking about investing for the long haul. Sometimes they're not using their own money. It's a reward back for behavior. If every time there's a transaction you generate a lot of financial literacy, powerful things can come out of that over time."

Protocol | Workplace

In Silicon Valley, it’s February 2020 all over again

"We'll reopen when it's right, but right now the world is changing too much."

Tech companies are handling the delta variant in differing ways.

Photo: alvarez/Getty Images

It's still 2021, right? Because frankly, it's starting to feel like March 2020 all over again.

Google, Apple, Uber and Lyft have now all told employees they won't have to come back to the office before October as COVID-19 case counts continue to tick back up. Facebook, Google and Uber are now requiring workers to get vaccinated before coming to the office, and Twitter — also requiring vaccines — went so far as to shut down its reopened offices on Wednesday, and put future office reopenings on hold.

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Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.

After a year and a half of living and working through a pandemic, it's no surprise that employees are sending out stress signals at record rates. According to a 2021 study by Indeed, 52% of employees today say they feel burnt out. Over half of employees report working longer hours, and a quarter say they're unable to unplug from work.

The continued swell of reported burnout is a concerning trend for employers everywhere. Not only does it harm mental health and well-being, but it can also impact absenteeism, employee retention and — between the drain on morale and high turnover — your company culture.

Crisis management is one thing, but how do you permanently lower the temperature so your teams can recover sustainably? Companies around the world are now taking larger steps to curb burnout, with industry leaders like LinkedIn, Hootsuite and Bumble shutting down their offices for a full week to allow all employees extra time off. The CEO of Okta, worried about burnout, asked all employees to email him their vacation plans in 2021.

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Stella Garber
Stella Garber is Trello's Head of Marketing. Stella has led Marketing at Trello for the last seven years from early stage startup all the way through its acquisition by Atlassian in 2017 and beyond. Stella was an early champion of remote work, having led remote teams for the last decade plus.
Protocol | China

Livestreaming ecommerce next battleground for China’s nationalists

Vendors for Nike and even Chinese brands were harassed for not donating enough to Henan.

Nationalists were trolling in the comment sections of livestream sessions selling products by Li-Ning, Adidas and other brands.

Collage: Weibo, Bilibili

The No. 1 rule of sales: Don't praise your competitor's product. Rule No. 2: When you are put to a loyalty test by nationalist trolls, forget the first rule.

While China continues to respond to the catastrophic flooding that has killed 99 and displaced 1.4 million people in the central province of Henan, a large group of trolls was busy doing something else: harassing ordinary sportswear sellers on China's livestream ecommerce platforms. Why? Because they determined that the brands being sold had donated too little, or too late, to the people impacted by floods.

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Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
Power

The video game industry is bracing for its Netflix and Spotify moment

Subscription gaming promises to upend gaming. The jury's out on whether that's a good thing.

It's not clear what might fall through the cracks if most of the biggest game studios transition away from selling individual games and instead embrace a mix of free-to-play and subscription bundling.

Image: Christopher T. Fong/Protocol

Subscription services are coming for the game industry, and the shift could shake up the largest and most lucrative entertainment sector in the world. These services started as small, closed offerings typically available on only a handful of hardware platforms. Now, they're expanding to mobile phones and smart TVs, and promising to radically change the economics of how games are funded, developed and distributed.

Of the biggest companies in gaming today, Amazon, Apple, Electronic Arts, Google, Microsoft, Nintendo, Nvidia, Sony and Ubisoft all operate some form of game subscription. Far and away the most ambitious of them is Microsoft's Xbox Game Pass, featuring more than 100 games for $9.99 a month and including even brand-new titles the day they release. As of January, Game Pass had more than 18 million subscribers, and Microsoft's aggressive investment in a subscription future has become a catalyst for an industrywide reckoning on the likelihood and viability of such a model becoming standard.

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Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.
Protocol | Policy

Lina Khan wants to hear from you

The new FTC chair is trying to get herself, and the sometimes timid tech-regulating agency she oversees, up to speed while she still can.

Lina Khan is trying to push the FTC to corral tech companies

Photo: Graeme Jennings/AFP via Getty Images

"When you're in D.C., it's very easy to lose connection with the very real issues that people are facing," said Lina Khan, the FTC's new chair.

Khan made her debut as chair before the press on Wednesday, showing up to a media event carrying an old maroon book from the agency's library and calling herself a "huge nerd" on FTC history. She launched into explaining how much she enjoys the open commission meetings she's pioneered since taking over in June. That's especially true of the marathon public comment sessions that have wrapped up each of the two meetings so far.

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Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

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