The fintech sector has been gaining momentum for some time, borne out of a desire to simplify financial systems and make financial services more accessible. From bringing personal banking to remote areas of Africa to innovating the worlds of private equity and hedge funds, fintech is causing a wave of disruption all round.
Technology is enabling fintech firms to provide these services in a new way, often by cutting out the middle man and going straight to the end-user. The rise of smartphones is perhaps one of the biggest drivers of the fintech revolution, with mobile apps providing the perfect channel through which fintech innovators can deliver their services at a low cost.
With the rise of fintech comes the democratisation of financial services, opening services that were previously inaccessible to regular consumers, such as investing and money management.
Fintech and trading
One interesting area within the financial sector that fintech startups have disrupted is trading. Twenty years ago, to start investing, a full-service broker was needed, who would then offer advice and invest money on the individual’s behalf. This would of course cost a lot of money and was only available to those with a high level of capital. In theory this meant that unless a person had a business degree, a wealth of knowledge, or significant financial resources, it was almost impossible to start trading.
However, a sector which has traditionally had a high barrier to entry for consumers is now part of the fintech revolution, with a new wave of consumer-focused trading and investment apps spreading throughout the financial sector. The most innovative among these are leveraging data and using advanced machine-learning to give their users targeted, bespoke and personalised information to help their trading.
Capital.com is a prominent example of a fintech company that holds this philosophy to its core, as Capital.com CEO Ivan Gowan explains: “The company has its eyes set on what has traditionally been the exclusionary world of financial trading and aims to encourage broader user participation through simplification, education and powerful technology.”
Since April 2016, backed by $25m in private investment, this leading fintech company has grown a talented, international team and developed trading software solutions and mobile applications, with a focus on making the world of finance more engaging and useful. Capital.com now has 1,000,000 app installs, with clients using the platform in more than 53 countries.
The company’s key offering is a web and mobile-based platform for trading contracts for difference (CFDs). Traders are able to choose from a wide range of markets to trade, including cryptocurrencies, forex, shares, commodities, and indices. If a client searches for a financial product in the app but doesn’t find it, this is tracked, and this particular asset can then be added to the platform. Traders also can enjoy powerful execution, tight spreads and zero commissions on trades.
Education, action, education
While the democratisation of the financial sector means that more people can access trading platforms and services through intuitive mobile apps from the comfort of their living room or while they’re on the train, it also means that consumers need to be better educated about the risks of trading.
“One of the major educational barriers is the cognitive bias faced by every retail investor,” explains Mr Gowan. “These biases affect how people enter and exit the market and can prove very difficult to shake off without the perspective and help of a third party. Disposition bias, for example, leads to traders closing profitable trades early without maximising the potential gains, and holding on to losing positions for too long in the hope the performance turns around.”
This is where Capital.com steps in, aiming to improve their users’ trading performances by showing them what they are working against. To do this, the platform has an embedded behaviour analysis tool, which works to detect clients’ trading biases and recommends personalised educational content to help them trade smarter. Powered by machine-learning, it delivers tailored news feeds, analysis, and educational materials based on users’ in-app behaviour. The aim is to provide useful technologies to help users make informed decisions about their trading, rather than relying purely on human instinct.
In line with its efforts to broaden participation, Capital.com has created a separate educational app, Investmate, which provides training for new and budding traders, allowing them to learn the basics of finance and make a safe entry into the market. Investmate delivers an expansive range of introductory trading courses on financial instruments, derivatives and CFDs, as well as a course on understanding the risks of trading.
“We are totally committed to offering personalised education alongside an award-winning trading platform, which really sets us apart from our competitors who are encouraging users to learn only through ‘copy trading’, that is, following other investors and replicating their trades in real-time. This approach does little to strengthen the trading skills of beginners and leaves users at risk of taking positions they wouldn’t otherwise make. By monitoring and analysing their performance, behaviour patterns and biases, we can provide tailored educational content based on current market trends and risks, through our machine-learning-based platform, putting our traders in a good position to trade independently and make strong returns,” says Mr Gowan.
However, the mission does not stop there. Clients are also educated through a series of webinars, courses, articles and daily video market updates by David Jones, Capital.com’s Chief Market Strategist and industry expert. The company believes that with greater understanding, investors will become more responsible, informed, and successful in their trading ambitions.
As the company works to convert novice investors into successful investors, it recognises its responsibility to protect its users throughout their trading experience. Capital.com is a strong advocate of consumer protections with a responsible and ethical stance towards positive client outcomes. Capital.com was the first CFD trading provider to become fully compliant with the new European Securities and Markets Authority (ESMA) regulations, which were labelled by its competitors as “draconian”.
The new measures imposed by ESMA include the introduction of negative balance protection to prevent traders losing more money than they invested, the additional protection of an individual trade closeout rule, and stipulated maximum levels of leverage, which reflect the volatility of each asset class. In addition, ESMA has mandated that advertising cannot include financial incentives related to the opening of an account and must feature a specific risk warning which indicates the historic trading success rate.
Mr Gowan explains Capital.com’s view of the new regulatory landscape: “Our belief was that ESMA’s regulations were well overdue, and that responsible CFD trading providers should have already implemented many of them, as nuanced intervention from regulators can be instrumental in creating a level playing field between consumers and CFD providers and help to improve client outcomes. We implemented the changes well in advance of the deadline as part of our efforts to ensure full transparency and legitimacy for our clients.”
The key ESMA measure was the reduction of leverage limits. The regulations stipulated that CFD trading providers must set maximum leverages across different asset classes, from 30:1 for major currency pairs down to as low as 2:1 for cryptocurrencies.
Once implemented, the company went one step further to assess the impact on their clients. The results were extremely positive, finding that the introduction of lower leverage rates has resulted in significant improvements for client outcomes. The study found that traders using lower leverage limits traded more successfully and were significantly less likely to face a margin call, with the rate falling from 30% in the months before Capital.com introduced the ESMA limits to just 5% in June. The study also found that the size of the average loss fell by over 80%.
Far from harming the industry as many predicted, lower levels of leverage for new traders look likely to ensure a more sustainable CFD market, as more successful traders engage with their chosen platform for a longer period of time. CFD providers that struggle to operate in this enhanced regulatory environment are encouraging traders to take unsustainably high risks, and if they cannot survive in a market that works better for the consumer, then the market is better off without them. The ESMA regulations ensure that more experienced and more sophisticated traders should be able to make informed choices about leverage levels, but novices can now trade with greater confidence following the implementation of these measures.
While these measures are a great starting point for retail investors, truly responsible CFD trading providers should be focusing on educating and informing their customers, to help them further improve their trading skills. This should include giving them insights on the markets they are actually interested in, rather than blinding them with random commentary. Capital.com’s ambition is for its users to enjoy trading CFDs over the long term, and the best way to ensure this is by delivering a great user experience and by helping them to trade successfully.
However, delivering a great user experience requires an entirely customer-centric approach. CFD trading platforms can be complex and difficult to navigate, limiting understanding and putting users at unnecessary exposure. Responsible trading providers inform their users of all the risks associated with their trades and go the extra mile to provide a rewarding experience for their customers, encouraging traders to make significant gains or walk away with minimal damage.
Mr Gowan says: “Our ethos is that our customers should always be able find the information they need, so that they can make informed and reliable decisions about their trading. Good trading platforms must provide a broad range of data to their users, while ensuring that all presented information is useful and easily understood. We believe that this is critical to making retail trading more sustainable, as it ensures that traders with any level of technical knowledge are aware of all exposure and can get the best possible insight into trading conditions.”
This translates into Capital.com’s customer-centric approach, with its easy-to-use platform designed to help clients trade the markets with peace of mind. The company prioritises clients in the execution of orders, provides negative balance protection, which stops the balance going below zero, and exclusive services tailored to clients’ needs, including a Personal Manager and SMS alerts. The Capital.com expert support team is available 24/7 in 13 languages via phone, social media, the website, and email, ensuring constant customer support.
The company is also set to expand its sights with the continuous introduction of new markets for traders, system improvements for making the experience better, and continuing its emphasis on customer service.
The leadership team
Capital.com has exciting plans to develop internationally, expanding into new jurisdictions, while at the same time building and enhancing the trading platform. To realise these ambitions and the potential of Capital.com, the company required a strong top management team with deep experience and specific knowledge of the industry.
CEO Ivan Gowan joined in January 2018, helping to establish the business as one of the leading responsible CFD trading providers in Europe. Throughout his career, Mr Gowan has built award-winning customer centric platforms and he now leads Capital.com’s efforts to put the user experience at the very core of its service, providing strategic direction to continue delivering significant customer growth.
David Jones leads Capital.com’s market analysis and education efforts and is a qualified technical analyst with extensive experience in financial markets, having begun his financial career in the 1990s as a currency analyst.
Ying Panagotiou, Head of Trading, started her career as a dealer in Finotec Group in 2006. Having spent more than a decade in different areas in the finance industry, she brings to Capital.com deep insight in the forex and CFDs trading domain, and ensures its customers enjoy the best possible trading experience.
Dmitry Ogievich, Head of Development, leads Capital.com’s technical team to ensure a customer-centric approach from all the company’s products and services, and deliver a fantastic customer experience.
Mr Gowan concludes: “Our leadership team works together to expand our customer base, attracting new users through innovative product features and high-performance trading. We are also leading efforts to achieve Capital.com’s core strategic vision: to offer the very best customer experience, through intuitive and high-performance products and services, and to help our users to trade responsibly and successfully, managing their risk and enjoying the trading experience.”