Leading The Revolution?
How The Modern European Investor Bolsters ETFs Popularity
The modern European investor is calling for low-cost, diversified, transparent investments, which is why digital ETF investing is leading the revolution against traditional wealth management.
According to a survey conducted by YouGov and BlackRock between August 2022 and February this year, 32% more (6.6 million) European retail investors are expected to invest in ETFs over the next 12 months. By 2026, BlackRock forecasts that ETF investments through digital platforms will reach €500 billion in Europe, driven by 10 million new users over the next five years. It is expected that Germany, the largest European ETF market with a 27% market share, will see the strongest growth in absolute terms over the next 12 months with two million new ETF investors.
ETF savings plans attracted 4.9 million investors in 2022 - with over 90% being from Germany. Germany is predicted to have 20 million users of ETF savings plans by 2026, according to Blackrock.
Furthermore, the survey found ETF investors are getting younger with millennials and Gen-Z increasingly eyeing ETFs as useful tools within portfolios. Currently, 63% of the ETF market is represented by investors aged 35 or over, but according to YouGov, 54% of next-generation ETF investors will be between 18 and 34.
The Growing ETF Arena
The popularity of retail investors using ETFs increased thanks to online distribution platforms like Scalable Capital or Trade Republic.
Trade Republic extended its savings plans and trading offering across 2,400 ETFs to 17 countries in Europe last year.
Nutmeg - the ETF-focused robo-advisor business that JP Morgan acquired in 2021 - was incorporated into Chase UK's 'Save and invest' page of its retail banking platform in February.
Revolut rolled out ETFs for all its customers across the European Economic Area in May this year. Powered by the Berlin-based fintech Upvest customers now have access to more than 100 ETFs, with the minimum investment amount of €1.
Beginning of this year, Vanguard expanded its German retail platform by adding self-directed investing in ETFs and mutual funds by launching ‘Vanguard Invest Direct’.
Cautious Investment behavior
While interest in ETF investments surges, data from Scalable Capital shows that in last year’s volatile markets trading actually declined on a per-client basis. The company says two-thirds of its users invest in ETFs. About half of its customers have an ETF savings plan and there has been a particular reluctance on the part of these clients to make changes. Scalable claims that people who commit a regular amount per month are less likely to pull out money in a stock market crash. The company broke through the 1 million savings plan mark at the beginning of this year with at that time an estimated customer base of 700,000.
The company’s co-founder said most people in the EU did not invest. The picture was similar in the UK. Part of the problem might be that many people think they need more money before they can invest. Research conducted by Kantar for Bux in the Netherlands, France, Germany, Italy, and Spain found that between 25% and 40% of respondents surveyed believed they did not have enough money to invest. On average across all five markets, 18 to 44-year-old respondents believed they should have savings of €2,833 before starting to invest and €799 per month to invest. In reality, market solutions offer ETF savings plans from €10.
According to Trade Republic, investors tend to ignore higher-risk offerings. Only 8% of its customers bought meme-stocks during its peak in 2021. In a similar vein, only 5 percent of customers have used derivatives. The German Institute for Economic Research conducted a survey of 216,000 Trade Republic users. It found that only 34% were motivated by short-term gains, and only 20% sought high-risk.
Inducement Ban Looms
The Retail Investment Strategy - published in May by the European Commission - calls for a ban on inducements for “execution-only” sales, where no financial advice is provided. Inducements – or commission payments, also called ‘kickbacks’ – are paid to financial providers to push certain financial products, whether they are in consumers’ best interests or not. This step from the European regulator could pose a risk and potentially remove easy access to low-fee investment products such as portfolios composed of ETFs.
Changing Market Dynamics
Market dynamics in the European investment industry are subject to change. Europe's brokerage startups are facing job cuts, decreasing trade volumes, and are struggling to fundraise. The second quarter of 2022 saw a decline of 31% in crypto exchange investment and a 78% drop in funding for neo-brokers. There has been a 36% decline in trading app downloads since last year, while money management app downloads are up, at least in the UK. According to App Radar, this is obviously a result of inflation and a high cost of living. In order to adapt to changing consumer attitudes over the next year, app marketers and developers must be aware of changing attitudes.
The Latest:
📍Digital Receipt Spar app 🇦🇹
Spar has launched its own app offering discounts, vouchers, flyers, and digital receipts to its customers. The solution is data efficient and requires no personal data for registration. Customers welcomed also the digital receipt feature that is intended to simplify shopping and speed up the checkout process. 🔗 Spar App info site
📍Digital Receipt Sonnentor 🇩🇪 🇦🇹
Sonnentor, the organic tea & herb provider, also announced switching to digital receipts in its German and Austrian markets. The collaboration with German fintech Anybill wants to create valuable digital touchpoints with customers. The receipts are provided using a QR code. Either the QR code is displayed on a screen at the checkout and customers can scan it with their smartphone or they show their personal QR Code in the app and it will be scanned. Customers don't necessarily need the Anybill app to get their digital receipts as they can scan the QR code with their smartphone camera and store it in the documents. 🔗 Anybill website
📍Monzo ‘Status Call’
Monzo has added a new feature to its app to help prevent its customers from falling victim to impersonation scams and has become the first bank in UK to launch a “call status” tool. The ‘call status’ feature offers a possibility for customers to verify within the app whether the call they are receiving is genuine or not, and report a scam directly through the call status. 🔗 Monzo blog post
📍Traders Place Launch
Traders Place is a new neo-broker on the German market with know-how from Austria, namely the Austrian DADAT Bank. Traders Place is a fully-fledged broker with 30 trading venues, no deposit fee, and order fees from €0, powered by partner Baader Bank. Customers benefit from €0 savings plans for funds, ETFs, and stocks. Crypto trading should be available soon 🔗 Traders Place company website
📍Param Acquisition of Twisto 🇨🇿
From Australia to Turkey. In 2021 the Czech Buy Now Pay Later pioneer Twisto was acquired by the Australian BNPL giant Zip. However, now Twisto reports that it’s being acquired by Turkish Param. Param provides a whole range of products for businesses and individuals - from payment gateways, digital wallets, and loyalty cashback programs to issuing payment cards, deferred payments, or financing. With the acquisition, Param gains a team with an understanding of the local culture and a key license to operate in the European Union. 🔗 Param company website
📍Asset Management For High Net Individuals
A new Viennese Fintech is looking to cater to users with more than 500,000 euros in assets. By helping to manage assets across different platforms Othis aims to provide a digital solution for wealthy individuals. Othis is not simply a portfolio tracker. The solution has the goal of ensuring the quality of the financial data, facilitating cooperation with tax consultants, and offering dynamic projects for liquidity planning. 🔗 Othis company website
📍Citi’s New Approach To Banking
Citi’s U.S. Retail Bank introduces ‘Simplified Banking’, a new approach that aims to offer services that grow with customers as they move through life’s stages. Citi is starting to retire retail bank account packages in favor of “relationship tiers” that are similar to travel rewards, like airline or hotel rewards programs offering more perks as balances increase. Citi will automatically link a customer’s eligible deposit and investments accounts to provide a Combined Average Monthly Balance that will place them in the appropriate Relationship Tier. As the customer’s Combined Average Monthly Balance* grows, clients may unlock Relationship Tiers, allowing access to more benefits and services. When customers enroll in Family Linking, they can unlock higher Relationship Tiers and access their benefits faster by combining average monthly balances with eligible family members who live with them in the same household. 🔗 Citi Simplified Banking Info page
📍Revolut Tap to Pay Launch
Revolut has rolled out Apple's Tap to Pay on iPhone for business and freelance customers in the UK. Tap to Pay on iPhone enables users to accept in-person contactless payments with just a tap of their payment cards or mobile wallet, with no need for additional terminals or hardware. The feature provides an easy way for merchants to accept payments from physical debit and credit cards, Apple Pay, and other digital wallets that enable contactless transactions. Revolut's launch coincides with the rollout of the technology by UK lender NatWest, which is making Tap to Pay available as part of its merchant acquiring platform Tyl. 🔗 Revolut Tap To Pay
📍Shares Aims To Become ‘Luis Vuitton of Trading Apps’
French social trading app, Shares, has announced it has become the first fintech in the country to secure both crypto registration (PSAN) and a stock trading licence as an investment company (PSI- Entreprise d’Investissement). Shares saw 150,000 members join in the 12 months since its UK launch in May 2022, and focuses on extending this UK success to France, with other European countries possibly later. 🔗 Shares company website
📍Long Avaited Monzo Expansion in Europe?
According to Bloomberg, UK digital neobank Monzo is reportedly eyeing European expansion by acquiring Nordic digital challenger bank, Lunar. Lunar has more than 650,000 customers in Denmark, Sweden and Norway. 🔗 Reuters media article
📍JP Morgan Chase 🇩🇪
JP Morgan Chase CEO finally confirmed in an interview to Handeslblatt, that the company’s online bank offering Chase, is set to expand into Germany and the wider European region. Chase has been active in Europe since September 2021, when it entered the UK market. According to earlier reports, Chase could arrive in Germany in late 2024 or early 2025, however, the CEO did not confirm the exact date for the launch. 🔗 Bitpanda Press Release
📍Bitpanda Pro Becomes One Trading
Fintech startup Bitpanda is splitting into two companies as Bitpanda Pro — the company’s cryptocurrency exchange — is going to become its own independent company called One Trading. Going forward, Bitpanda is still going to offer crypto trading — but it will act as a broker, not an exchange. One Trading is designed for institutional investors who handle large orders or businesses that want to trade using botsSplitting the company also means that Bitpanda won’t face as many regulatory challenges as One Trading. For instance, One Trading plans to offer derivatives 🔗 One Trading company site
📍Deutsche Bank Eyeing Scalable Capital
According to Handelsblatt Deutsche Bank, is reportedly engaged in early-stage talks with Scalable Capital over a potential investment or partnership deal. The bank is assessing whether the platform could prove beneficial to its private client business. Deutsche Bank made two acquisitions last year by acquiring the investment bank Numis and Belgian wealth-tech Abbove for wealth planning services. According to some media information, Deutsche Bank is also developing an app-based offering for consumer investing, which should arrive in 2024. 🔗 Handelsblatt media article
Beyond George Suggests
📺 What AI can and can’t do in financial services/Fintech Insider podcast by 11:FS 👂🏻 Listen here
📚 ETF Ecosystem Unwrapped 2023 /report by ETF Stream 👓 Read here
🗞️ ETF Insider Magazine /September 2023 issue 👓 Read here
🗞️ FF Banking Technology magazine /September 2023 issue 👓 Read here
🗞️ INSIGHTS The Financial Brand magazine /Fall 2023 issue 👓 Read here
🎤 SIFTED SUMMIT /4-5 October 2023, London 👉🏻 Conference page
🎤 MONEY LIVE/Payments Europe /21-22 November 2023, Amsterdam 👉🏻 Conference page
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