Around 3.4 million Irish people use Revolut. That’s an incredible achievement for a company offering its services to a country with a population not much greater than 5 million. It is, on paper, a virtual bank, not much different to something like PayPal. Indeed, its popularity grew from the idea that it could help you move money quickly – and for free to friends and family: Splitting a cab fare, paying someone for a round of drinks, and so on.
Yet, Revolut is also a financial trading tool. You can buy stocks and crypto, and invest in commodities. It is an example of a fintech application, one that takes the middleman out of investing and trading. It is, of course, not alone in this respect, as so many other apps give people access to global financial markets. If you listen to Elon Musk’s rhetoric about his future plans for Twitter/X, you can appreciate that he believes the social media platform will soon be a trading & investment entity as well.
Dual shocks in the late 2000s changed the game
It is perhaps easy to take for granted how sudden this dramatic change came to light. The term “fintech,” i.e., financial technology, was coined in the 1990s, touching on the fact that financial markets were becoming more dependent on computers and the internet. Yet, it wasn’t until the dual shocks of the 2000s – the Great Financial Crisis and the introduction of smartphones – hit that the fintech revolution really kicked off.
Banking on a smartphone meant that there was less and less need for a physical bank to provide services. But those behind fintech platforms started to ask, if we don’t need physical banks, could we say the same for wealth managers and traditional investment facilities? Direct trading platforms like eToro started to gain traction, though they still targeted investors and traders with experience rather than ‘normal’ people.
However, today things have become all the more social. Apps like Robinhood have become proverbial social platforms. On the other side of the coin, platforms like Reddit and Twitter created communities dedicated to trading and investment – this led to the coining of terms like FinTwit (financial Twitter) and CT (crypto Twitter).
Prediction markets have made trading social
Things became more social again with the rise of prediction markets. Thus, people can trade events like football in a different way from traditional NFL game betting, and financials, creating markets for outcomes of events like the Fed interest rate decisions. These are trading platforms that create markets decided by users. They have become so influential that they form part of the news cycle, but they are also aimed at casual users and investors.
For balance, we should point out that the fintech revolution has also arguably given people a false sense of how easy it is to invest. Things might look easy now as the stock markets go up and up, but there are pitfalls, and many of the lessons of 2008 seem to have been forgotten. Moreover, they also put complex trading tools – derivatives, leverage trading – in the hands of inexperienced traders. It is promoted as an open playing field, but it also puts casual investors up against experienced institutions.
Still, it is a remarkable moment that you can simply open an app, connect with your friends and start investing in something like gold. In the 1990s, to do such a thing would have involved a broker and, arguably, a hefty cash sum. Now it can be done in seconds with a few bucks to get started. Does it mean you’ll get rich? Perhaps not, but it has reframed investing as a social activity, and it is speaking to billions of people around the world.
