The pandemic prompted a retail investor boom on the stock market last year, and emerging market players are confident this is just the beginning.
Retail trading as a share of overall market activity has almost doubled over the last six months from between 15% and 18% to more than 30%, according to Credit Suisse. Unprecedented demand for brokerage apps has even forced companies to issue temporary blocks on new registrations.
Retail investing has been on a steady rise since 2018, when early tech-savvy brokers like RobinHood and Webull began disrupting the market with zero-fee trading. While investors with less than $10,000 were previously shrugged off as a waste of time by larger firms, these brokerages catered to lower-income demographics and earned their trust by removing traditional barriers to entry.
But the pandemic truly catapulted retail investing into the mainstream. In the wake of lockdowns, people had more time on their hands and higher personal savings levels supported by government stimulus checks. At the same time, a plethora of new Youtube and social media accounts emerged that catered specifically to the novice investor. The stock market plummet in March 2020 presented an opportunity to purchase blue-chip stocks at drastically reduced prices, drawing the interest of beginning investors.
Tinkoff, the largest brokerage platform in Russia, has shared in the benefits of this retail investor boom. The company saw a record wave of new registrations in 2020, now boasting 5.2 million registered customers on the Moscow Exchange and RUB 415 billion in assets under management. Tinkoff app users now spend an average of 27 minutes on the app per day, placing it on par with social media heavyweights like Facebook.
Like many of its peers, Tinkoff remains confident there is plenty of room for growth ahead. It has set out an ambitious strategy to reach 5 million active users by 2023.
“The new retailers that have come to the market over the past five years are not a homogenous group – they are a very diverse group of individuals, and we must now understand who each customer is and how we can cater to them best,” said Oliver Hughes, CEO of Tinkoff Group, at the St. Petersburg Economic Forum (SPIEF).
Tinkoff has set a strategic goal to create financial products that cater to every demographic, from high-net-worth individuals to millennials looking to make their first trades. They also view education as key to building this customer growth, saying they feel a responsibility to ensure their coustomers have the necessary knowledge to make sensible personal finance decisions. In line with this, Tinkoff has created a number of platforms to assist customers in managing their money, from their Youtube channel “Money Doesn’t Sleep” to an investing guide complete with regular quizzes.
Brazil is another emerging market economy where retail investing is fast becoming mainstream. Since 2017, the number of retail investors in the Brazilian stock market has quintupled to over 3 million, thanks to a significant drop in local interest rates from 14.25% in 2016 to 2% in 2021 and the rising popularity of affordable brokerages.
The country’s largest digital broker, XP Inc., shared Tinkoff’s view that financial education would be key to sustaining further growth.
“We see financial education as key to maintaining the new clients that have joined brokerages across the world in the past year as well as to improving customer engagement,” said XP co-founder Marcelo Maisonnave, speaking alongside Oliver Hughes at SPIEF.
According to an informal survey conducted by the Economist, most Brazilians who bought their first stocks in the past two years plan to keep investing. By contrast, in Russia only about 5% of the population is currently involved in stock market activity, meaning there is plenty of room for growth in retail investment.
