As neobanks like N26 and Revolut, as well as payment providers such as PayPal, Square and CashApp move into cryptocurrencies, does this pose a threat to the cryptocurrency exchanges?
Investing has changed, according to Francis Bignell at Fintech Times. He says, “Due to the pandemic, younger, tech savvy individuals working from home, spending more time online, and flush with stimulus money found solace in investing,” and adds, “As a generation known for not accepting things as they are, simply because it’s how they’ve always been, they relentlessly refused to approach investing in the “traditional way.”
What we now have is a rising class of retail investors who value investments by the social currency and utility (e.g. meme stocks, NFTs and crypto). The result of these trends raises a number of questions about the future of investing.
Bignell points out: “In early 2021, Reddit users battled with Wall Street by skyrocketing GameStop’s stock share. This, along with the rise in meme stocks, show that Wall Street is no longer dictating what is worth investing in and what isn’t anymore.” You could say a new approach to valuation is rising, one that’s based on the social worth of a company versus traditional notions of profitability.
Crypto exchanges challenged by new investing environment
Public.com is an evolving investment platform. It will shortly support trades in bitcoin, bitcoin cash, ether, ethereum classic, dogecoin, litecoin, stellar, zcash, cardano and dash, and is being tailored to a growing, young demographic looking to trade in meme stocks. Public offers zero-commission stock trading and has an added social media component that could leverage the emerging meme stock-fuelled retail investment frenzy, as exemplified by Shiba Inu’s 24,459,593.97% rise in the last year, and Dogecoin’s 8,765.17% increase in value.
Robinhood is also about to challenge the crypto exchanges by introducing crypto wallets for its users to trade with other wallets. Robinhood users had previously been able to buy and sell a few cryptocurrencies, but had been unable to send those coins to external wallets or receive them from elsewhere. When this is implemented, it will offer Robinhood access to the space dominated by Coinbase and others.
US based fintech, MoneyLion, has announced it is adding crypto trading to its all-in-one financial services app, joining the ranks of N26 and Volt. It will introduce buying and selling capabilities for bitcoin and ether, according to its CEO, Dee Choubey. Choubey told CNBC, ““It’s a very important first step if we think that the future of fintech is DeFi. We will have created a segment of the population and have exposed them to DeFi, so when it becomes more ubiquitous, they’re fully prepared to take advantage of it.”
Maurizio Raffone Chief Financial Officer at Credify Pte. Ltd, explained how investing in a neobank would differ from a crypto exchange: “Neobanks’ typical client may not be a savvy crypto investor but is interested in having some exposure to the asset class and may not be bothered about NFTs, altcoins or stablecoins and so just having some degree of exposure to BTC or ETH would suffice. On the other hand, crypto exchanges do not really focus on providing any traditional financial service support but do generally provide a greater investment choice and with more sophisticated investment techniques.”
What does that mean for banking and financial institutions? It means that they must have some form of crypto or digital currency feature or be left behind as their customers become more digitally aware.