The proliferation of WealthTech companies has helped more retail investors gain access to the world of investing, but there is still a gap. New technology and access to financial education is helping to bolster the democratisation of investing.
One of the WealthTech companies with financial inclusion enshrined in their operations is investing-as-a-service provider Velexa. However, Tamara Kostova, Velexa’s CEO, isn’t sure why every financial services firm doesn’t have this focus. With retail investors accounting for 22% of daily trading volume in 2021, up from 10% in 2011, the size of the market is clearly on the rise. She said, “We believe that by increasing the number of participants, we enhance liquidity and foster increased opportunities, thereby contributing to the overall health and growth of financial markets.”
One recent trend bringing greater inclusivity to the world of investing is fractionalisation. This is a method of splitting a larger asset into a smaller portion, allowing an investor to access a fraction of the asset, rather than needing to own the full thing. Initially seen in the stock market and real estate, this trend is now expanding to the bond market. Kostova said, “The bond market is one of the largest securities markets globally and institutional investors have long reaped the benefits that this asset class has to offer. Bonds act as a safeguard against economic uncertainties. In times of market downturns, the relative stability and credit risk of bonds provide a buffer, preserving capital and mitigating losses.”
In line with its mission of democratising investing, Velexa’s platform enables retail investment firms to offer fractional bonds to their customers. Its infrastructure allows firms to seamlessly integrate fractional bonds into their existing channels or create new investment offerings. Kostova noted that financial institutions looking to serve retail investors need to be aware that every customer is unique, and one size doesn’t fit all. As such, Velexa aims to respond fluidly by offering customisable solutions that can be tailored to the specific needs of a customer or the operations of a bank or broker.
Velexa offers a fully customisable API-based investing platform that boasts global market access across all major asset classes and currencies. Its technology can be leveraged by traditional banks, neobanks, FinTechs, brokers, private banks and wealth managers. Its B2B2C investing platform allows clients to embed wealth management solutions, with firms even able to implement investing services from scratch within just weeks.
The importance of financial education
While increasing the access to investing services is the core of democratising wealth management, it is only half of the process. Financial education is an important pillar of greater financial inclusion as it can empower new investors to make proactive decisions about their financial future and can give them the confidence to start investing. It can also allow retail investors to leverage self-guided investment platforms and not be reliant on advisors. This ability is becoming increasingly beneficial in the current market. A new survey from Intelliflo found that 73% of the advisors it questioned had seen the advice gap widen over the past five years.
Kostova stated that by understanding investment options in the market, such as stocks, bonds, mutual funds and real estate, investors can build a personalised investment plan that matches their goals. Similarly, by educating them about risks, including market fluctuations, inflation, and liquidity, they can build a strategy based on their own risk tolerance.
“This knowledge fosters informed decision-making, preventing impulsive choices based on short-term market movements,” she said. “But the true power of financial education lies in building confidence. Equipped with the right tools, new investors navigate the financial landscape with a sense of control, paving the way for long-term success.”
Velexa’s technology is used to support investors around the world and every end-user will be at a different stage of their investment journey. This is particularly the case for some of the emerging markets Velexa is currently operating in. For example, Brazil and South Africa have notably high growth rates, but also have relatively low levels of financial literacy. As such, Velexa’s platform was designed to cater to diverse investor needs so everyone can get the guidance and support they need, whether they are first-timers or seasoned traders.
Additionally, the Velexa Wealth App was designed specifically to address the needs of the nascent investor. The app prioritises user-friendliness through a simple, intuitive interface and educational resources. Velexa also partners with exchanges and financial institutions globally to offer these educational resources seamlessly.
Trends to lookout for in wealth management
It is evident that Velexa is at the forefront of innovation within the world of wealth management. But fractionalisation is not the only trend in the market it sees gaining steam in the coming years.
For Kostova, one of the most exciting developments in the wealth management sector are the latest developments in artificial intelligence (AI) and machine learning algorithms. It has been impossible to avoid the hype around these technologies over the past couple of years, spurred on by the greater availability of the technology and hype around generative AI capabilities. As such, AI is now seeing greater adoption in wealth management for portfolio optimisation, risk assessment, and personalised investment recommendations, just to name a few. Kostova said, “These technologies enable wealth managers to analyse vast amounts of data and deliver more tailored solutions to clients.”
Another area Kostova is seeing some exciting development is the digital asset market. She highlighted a new emergence of WealthTech solutions focused on digital assets, also known as decentralised finance (DeFi). These services include digital asset trading platforms, blockchain-based investment products, and digital asset custody services, all of which cater to investors who wish to increase their footprint in this market. Firms that fail to offer digital assets are beginning to lose customers due to the increasing demand. A recent PwC survey found that 53% of the digital asset investors it surveyed said they would consider changing brokers or banks if they lacked adequate digital asset trading services.
One final exciting trend Kostova pointed to is the rise of holistic financial service providers. She said, “WealthTech companies are expanding beyond investment management to offer comprehensive financial wellness solutions. These tools help users track their spending, set savings goals, manage debt, and improve overall financial health, providing a more holistic approach to personal finance management.”
These one-stop-shop FinTechs, also known as super apps, are gaining popularity. The global super app market was valued at $58.6bn in 2022 and is projected to grow at a 28.9% CAGR to reach a $722.4bn valuation by 2030. These apps originally started in Asia with the likes of WeChat and Alipay, but they have started to enter other regions. In fact, A report from PYMNTS and PayPal surveyed consumers in the US, UK, Germany, and Australia, found that 72% of consumers expressed interest in super apps – UK consumers were the most interested with 74% indicating interest.
Velexa is on a mission to help bring the next stage of super apps enabling easy-to-implement investing services. Kostova said, “Embedded payments transformed tech companies into financial powerhouses, and we are aiming at unlocking the next frontier: embedded investing. Consumers seamlessly pay throughout the day, but investing often feels like a separate, less frequent activity. We aim to bridge this gap by embedding investment options seamlessly within everyday apps. Imagine making micro-investments with a tap, turning everyday actions into opportunities to build your financial future.”
Challenges in the market
The current market is not without its challenges. The biggest of these is the increasing complexity of the investment ecosystem, which is becoming harder to navigate. As the number of digital assets grows and new types of assets enter the market, firms will need to be prepared to support customers, wherever they are in their investor journey.
Kostova said, “It is very important to build the backbone infrastructure that can streamline and support all this complexity, such as Velexa’s Investing Platform. It enables institutions to work with any vendor to really customise their product based on the needs of the customer. It also allows the institution to grow alongside the product and have the flexibility to add new features when needed.”
Looking towards the future of the financial landscape, Kostova was confident Velexa will empower financial institutions as they move towards greater democratisation of investing. She concluded, “At Velexa we believe innovation and accessibility are the keys to redefining the very core of retail finance. This isn’t just a vision; it’s the journey we’re on. We empower financial institutions to deliver personalised investing services, so their customers in turn can invest smarter, wider, and more profitably – paving the way for a healthier financial future.
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