Australia / Press Releases
'Gamified' Platforms Disrupt Stockbroking Industry

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by Matthew Barry
Sep 27 2020

As the ASX 200 index fell over 35% to reach a low of 4,500 index points in March, new retail investors flocked into the equity market. ASIC reported over 140,000 new investor accounts from late February to early April, compared to an average of 34,500 over the same time period in 2018-19. This astounding influx occurred at a time when consumer sentiment had fallen sharply, unemployment had spiked and the global economy was at a standstill.

New entrants have disrupted the Investment Banking and Securities Brokerage industry, using low fees and accessible platforms to attract a new generation of young first-time investors. A surge in new retail investors has fuelled the market, driving a 29% rally in the ASX index from April to September, to reach over 5,800 index points.

Next generation equity investing

Many Australians conduct their equity investments through the platform offered by their bank of choice, such as Commonwealth Bank’s CommSec and NAB’s Nabtrade.  Players in the National and Regional Commercial Banks industry have competed for market share by offering value-add services like financial advice, broker research reports and IPO offerings. In contrast, new entrants to the market have chosen to complete on wholly different terms.

‘New entrants, such as Robinhood in the USA and Superhero in Australia, have disrupted the stockbroking landscape by offering cheap transaction fees and accessible app-based platforms. The ‘gamification’ of investing has made equities far more accessible to tech-savvy demographics’, said IBISWorld Senior Industry Analyst, Matthew Barry.

Gamification of the stock market is particularly prevalent in the US-based online broker platform, Robinhood, which offers a free share on sign up and has a game-like interface that entices users to trade with just a few taps. Australian players such as SelfWealth have gone one step further, incorporating social-network features, such as allowing members to compare their investment performance with each other. SelfWealth had 22,000 active investors in February 2020, while in June 2020 it had grown to almost 140,000.

‘Faltering trust in Australia’s big banks, particularly in the wake of the Banking Royal Commission, may be another factor driving young consumers to alternative investment platforms. This may be particularly damaging for the banks, as it prevents them from offering other services to new stockbroking clients, such as savings accounts, credit cards, or home loans’, said Mr Barry.

Success factors for established players

Major trading platforms will need to adapt to remain competitive.

‘Traditional brokers will need to gamify their user experience over the next five years, by significantly increasing the usability and capability of their smartphone applications. Convenience and simplicity are critical to attract and retain young first-time investors. Established players will continue to benefit from their economies of scope, by integrating online broker platforms into their suite of other banking services’, said Mr Barry.

At a time when property investment is becoming increasingly inaccessible for young Australians, and risky day-trading is experiencing a boom in popularity in online forums, the number of new retail investors is expected to continue to rise. Growing retail demand is expected to create ongoing opportunities for successful brokerage platforms. Revenue across the Investment Banking and Securities Brokerage industry is expected to grow at an annualised 3.3% over the five years through 2025-26, to reach $8.4 billion.

‘Fierce price competition from new entrants is projected to erode margins for brokers across the industry, as consumers continue to demand cheap fees and demonstrate weakening loyalty to their existing brokerage providers’, said Mr Barry.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647