By Carolyn Corda, CMO and CCO, Adara
Finance marketers are presented with a much-changed landscape since the one they knew before the world shut down. Gearing up for a post-covid and post-tracking world is no mean feat, especially when finance regulations around data and marketing are added to these general industry challenges.
Reaching customers in a relevant and timely way is more important than ever. Finance marketers know that it’s crucial to find customers in important moments of change in their life: as they buy a new house, have kids, write their will, retire or make any other decision that might make it time to change banks. Engaging with a potential customer or existing one in a personal way is crucial to getting noticed in those moments.
What’s more, marketers need to understand what their customers need and want in a wider sense to have any chance at effective decision-making based on smart insights, rather than guesswork based on behaviours that existed pre-pandemic. However, understanding customers, how their lives are changing and what might be coming next is a challenge exacerbated by recent changes in the industry.
Google Chrome has delayed the coming ‘death of the third party cookie’ until 2023, but this is just that – a delay. Although the industry may not yet be ready (cue some scrambling from Google to find more time), marketers are simply being given an opportunity to test new technologies that ultimately do not rely on third party behavioural tracking. Meanwhile, with Apple asking people to opt-in to tracking (which, most seem to be saying no to) along with ever tightening privacy and data laws, marketers in finance may feel that making informed decisions around what a customer wants now or will want next is becoming an increasingly daunting task.
First party, last resort?
Of course, most brands sit upon a wealth of data directly from their own customers. What could be more useful to a brand than insights that directly relate to how an individual engages with your specific brand, one might ask?
While first party data is an incredibly useful resource for marketers, it does have huge limitations that will come into sharp relief as the ability to track individuals across the web wanes. Understanding how someone interacts with another brand not only adds dimensions to a given brand’s understanding of the individual, it also enables them to predict more accurately how that person may want to interact with the brand in future.
Take, for example, a credit card company that knows it has a customer on an airline rewards program. If it also knows how that person interacts with hotels, spas, restaurants, concert venues – they can get a true idea of what motivates them to travel and which offers or messages might appeal. For example, a person who loves to splash out on a spa day when they travel may well be a good recipient for a push around wellness-based rewards. This is one small point around how a wider understanding of someone can enable both brand and customer to get the most out of the relationship.
Danger in the walled gardens
A finance marketer might then think – great, Facebook and Google can find those who like to splurge on experiences. It’s true that these platforms can help financial institutions find audiences that are right for the message.
However once again there are limitations – each platform only enables reaching those audiences within that platform. So across other parts of the web and the customer relationship, the business starts to lag in terms of delivery of relevant and personal customer engagement.
A privacy-first approach
So it seems that on top of first party data and engagement within the walled gardens, marketers need a supply of data that can deliver rich insights across individuals. Of course, the foremost concern with any data for this purpose is that it is privacy-centric and absolutely secure.
Key to this is data partnerships. First party data can be taken from a brand, tokenising it so that sensitive data ever needs to leave the business’ firewalls and remains totally anonymous to any outside parties, giving partner brands insights into customers. At Adara, we are able to leverage these insights, layering them on top of each other from multiple brands to create a fully anonymous and secure individual graph to enable relevant and personalised customer engagement, as well as understanding of what customers need and want from their financial institutions of choice. This means that brands have access to intelligence they know to be accurate, and predictive – so they can make informed decisions both about what a customer wants today and what they may well require in future.
In other words, they can make decisions with confidence. Confidence that they understand what their customers want, and what they’re comfortable doing in this new world. And most of all, confidence that this insight does not come at the expense of privacy or security – that it is safe to use and unexploitable by other parties.
Navigating changing behaviours for a financial institution is critical, as customers’ behaviours and preferences have changed dramatically and old data will not suffice to make decisions with confidence. While old tracking technologies may still exist, they are on the way out: now is the time to be sure your brand is ready.
The future of retail trading
Joe Jowett, CEO of StrikeX
The 2020s look set to be the decade of the retail trader. As the pandemic forced large parts of the globe to turn their bedrooms into offices, a new generation of mostly young traders and investors piled onto online trading platforms hoping to combat the doom and gloom of financial insecurity that hung over many at the time. This trend looks likely to outlast the pandemic itself and the considerable power of retail traders, at times making up over 20% of total worldwide trading volume, continues to disrupt the market.
As new trading platforms vie for users in an increasingly competitive environment, 2022 will pose a number of challenges concerning safety and accountability, while a consolidation of crypto and traditional asset trading looks likely. Tools like StrikeX’s own upcoming platform TradeStrike, due to be released later in the year, will ensure that trading and investing can achieve further democratisation and transparency, while enabling wider market access for both new and experienced investors.
Generation investor is here to stay
The skyrocketing growth of online trading platforms offering commission-free trading has fundamentally altered the demographics of the stock market. Research shows that the median age of new investors since 2020 is around 35, a significant reduction from pre-pandemic traders, whose median age was 48. Similarly, the average age of Robinhood’s 22 million users is 31, highlighting the fact that most online platforms are predominantly catering to millennials and Gen Z traders.
This dramatic shift in demographic, fuelled by easy access to online platforms with mobile apps and extensive social media networks on Twitter and Reddit, means that this new generation of traders and investors has a substantial influence on the market. This was seen at its most extreme in early 2021, when the subreddit WallStreetBets conspired to “short-squeeze” institutional investors who had bet against the ailing GameStop stock, causing headlines around the world.
While making money remains a priority for young traders, the sentiment behind the GameStop saga was one driven by a boisterous confidence that the traditional gatekeepers of the stock market could be swept aside, and a world previously shrouded in secrecy could be democratised and made accessible to the amateur investor. This same sentiment is shared by large swathes of crypto traders and investors, who believe in the transformative potential of decentralisation inherent in blockchain technology.
While online trading platforms like Robinhood enabled the GameStop rally, the decision to momentarily suspend trading of a number of so-called “meme stocks” caused millions of traders to lose their money and cast aspersions on the platform’s credentials of democratising the trading world. Hundreds of lawsuits concerning the episode are still pending and many users took to crypto and NFTs instead, where the blockchain-enabled peer-to-peer trading mechanics eliminate the need for intermediaries.
The GameStop saga has highlighted that trading platforms must prioritise accountability and transparency as part of their mission to benefit the retail investor. A trading platform with the unilateral right to restrict the trading of its users without prior warning will find it hard to win over a generation of investors and traders which values transparency and access above all else.
Further factors can play a part in providing broader access to new investors, including a clear breakdown of costs, such as withdrawal and order fees. As many online platforms have cluttered and complex user interfaces, these aspects are easily missed by beginners and can inhibit the accessibility to new users more generally.
Tokenisation is the future
One way to significantly democratise retail trading is the tokenisation of assets. Blockchain technology is seeing a wave of adoption across multiple sectors, from digital art and the metaverse to asset finance and real estate. As is demonstrated by the world of NFTs, any asset can be tokenised to establish an immutable and transparent record of ownership on a blockchain. Tokenising shares in stocks, bonds or commodities can completely transform the way we trade and offers the transparency and security lacking in many existing platforms.
One of the benefits of tokenisation is the possibility to trade 24/7, regardless of stock exchange cycles. As transactions can be recorded on the blockchain even when markets are closed, users can trade irrespective of their time zone, opening the market up to a wider base of traders and investors across borders. Further, blockchain automation allows for maximised transaction speeds with minimal transaction fees, while any information stored on the blockchain is accessible and verifiable by all, taking data ownership out of centralised control.
One of the most transformative benefits of tokenisation is the possibility to trade all assets, from stocks and commodities to crypto and NFTs, on one single platform. Juggling multiple portfolios on various exchanges is a significant entry barrier, as traders can lose sight of their investments. Tokenisation removes this barrier and opens the market to new users wishing to invest in both crypto and traditional shares. Finally, tokenisation allows for fractionalised shares, making diversification possible at lower costs.
A future-proof platform
At StrikeX, we are developing a solution which delivers on the benefits of tokenisation, while offering a transparent and user-friendly product to its users. Our flagship platform TradeStrike, due to launch later in 2022, is developed by retail investors for retail investors and offers tokenised assets, including stocks, NFTs and real estate, as well as cryptocurrencies, all in one unified interface.
TradeStrike will enable users to access the widest possible range of assets and 24/7 trading across borders will open up the market to a whole range of new traders who had previously been restricted from investing. Complete with a clean and intuitive interface and a range of educational tools, TradeStrike is designed to empower retail traders to make the best decisions based on clear and transparent information.
Online trading platforms have seen a monumental growth in recent years and have enabled a new wave of investors to access a previously safeguarded market. The year ahead will show whether these platforms are equipped to deal with challenges such as transparency and accessibility. One thing is clear: Generation Investor has changed trading for years to come.
Predictions for Alternative Data in 2022
Neil Chapman, CEO of Exabel
2021 saw various firsts for alternative data. The $1.6bn flotation of SimilarWeb evidenced the emergence of the first ‘unicorn’ alternative data provider, with Yipit Data’s capital raise subsequently resulting in a second unicorn valuation. On the regulatory side, the Securities and Exchange Commission issued its first fine against an alternative data provider, charging App Annie with securities fraud. Meanwhile alternative data adoption continued apace following its breakout year of 2020, in which investors had found alt data’s often higher frequency to be particularly valuable amidst such unprecedented uncertainty. This year the London Stock Exchange Group published research showing that in 2021, of all the financial services firms that it contacted, only 1% are not using alternative data at all; in 2018 that number was still up at 30%.
Looking ahead into 2022, it is now possible to make some predictions around what awaits the ever-growing community of alternative data stakeholders. 2022 will be the year when barriers to usage of alternative data will truly begin to come down:
Tooling solutions have their moment
Alternative data’s history is rooted in a form of elitism. For much of its early development, only the most sophisticated hedge funds had access to the cutting edge technology and brainpower required to successfully extract value from alternative data. As the sector matures this truth is changing; as the knowledge spreads out of the hedge funds so too do the technical capabilities, increasingly in the shape of external software platforms that allow practitioners to extract value from alternative data. Such platforms can bring an alt data capability to new users of all shapes and sizes, from non-data savvy investment teams at larger long-only investment funds to smaller family offices that have previously had the knowledge and the appetite to make the most of alt data, but had lacked the technological opportunity. This externalization trend could ultimately touch the sophisticated funds that first conceived the use of alternative data, since growing efficiencies could make these external platforms more competitive than that which is possible within a single fund.
The SEC swings into action
As mentioned, the SEC issued its first fine to an alternative data provider in 2021, finding App Annie guilty of securities fraud. This was not the precedent-setting example that the market has long been anticipating however. For several years, legal advisers have been warning hedge funds and alternative data providers that the SEC might wade into the sector and punish a practitioner that was using alternative data in an as-yet unspecified manner deemed by the regulator to be ‘too loose’. In the case of App Annie, the regulator found the app data provider to be guilty of behaviour that would be reprehensible in any sector, not related to alternative data specifically. What the App Annie judgement demonstrates is the fact that alternative data is now firmly embedded on the SEC’s radar, so there may well be further regulatory activity in 2022.
Buyside personnel moving into product
2021 has seen a growing trend for buyside personnel taking their hard-earned skills onto the product side. This could be a sign that strong venture capital flows have finally convinced these asset managers that the time is ripe for a more entrepreneurial project with high growth potential, or it could be a signal that the market is moving towards the externalization trend mentioned above, or both. Either way, it is a trend that looks likely to continue in 2022.
The rise of Synthetic Data
Synthetic data, or data that has been manufactured or created artificially for a specific purpose, is coming increasingly into vogue in data science circles, and alternative data is no different. Hedge funds have long used data pertaining to private individuals, in almost all cases for uses in which personal identifiers are irrelevant to the value. With public and regulatory scrutiny increasing around privacy, the benefits of synthetic data in which personal identifiers are scrambled and obfuscated are becoming increasingly obvious. Other uses of synthetic data, such as for generating a larger dataset for model training, or using tweaked datasets for scenario-planning, might also have potential futures in the alternative data world as the techniques are being perfected more widely.
The march of the retail investor
The Gamestop affair back in January 2021 announced the return to the limelight of an established but sometimes forgotten player – the retail investor. The year turned out to be an influential one for the man on the street, who drove valuations both up and down, meaning an investor not paying attention to the chatter could easily find themselves burned. In 2022 this trend is likely to continue and alternative data offers opportunities both to institutional investors seeking to track what retail investors are investing in in real time, and increasingly opportunities for retail investors themselves to make more informed decisions with platforms tailored for their use.
Expansion into Europe
Alternative data originated in the United States, which is still the sector’s hinterland. In recent years inroads have been made in Asia, but the next push looks likely to be taking place in Europe. Increasing local availability of credit card and other data types, taken along with the developed nature of European markets, has made Europe a geography ripe for alternative data to increase its influence. Language and privacy regulation hurdles still exist though, and the market will need to continue to find solutions that negate these hindrances.
New forms of NLP
Natural language processing has been in use since the earliest forms of alternative data were emerging in this millennium’s first decade. Textual analysis has spread from creating sentiment gauges to track social media such as Twitter, and into the cat-and-mouse contest between hedge funds trying to extract extra meaning from earnings calls and investor relations executives attempting to keep corporate communication as neutral as possible. In 2022 a new battleground is being mapped around audio analysis, with alternative data emerging around the tone and cadence of corporate communicators, with the aim being to mine this data and reveal more than the speaker is intending.
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