Capital.com: An intuitive, innovative fintech business
Lauded as Most Innovative Broker at last year’s European Awards, the Capital.com platform aims to make trading smarter, simpler and more intuitive. Users can access 2,000 of the world’s biggest markets, utilising market-leading spreads and zero commission to make their move on the most popular indices, commodities, cryptocurrencies, shares, and currency pairs via the web and on mobile.
Founded in 2016, significant investment in the Capital platform over the past year has meant that it’s primed to support the mobile users responsible for 80% of the company’s client trading. A team of 190 technologists are driving mobile onboarding, which CEO Ivan Gowan believes strengthens Capital’s fintech aspirations compared to its business-led competitors. “It’s as much about attitude and aptitude as it is about technology competence,” he says of Capital’s key staff from tech and finance backgrounds. They have ensured the transition from fintech startup to heavily regulated business, operating under the FDA and increasing levels of process and system design, has been a smooth one.
Gowan notes the rise of cryptocurrencies has attracted a wave of technologists to the industry but believes it’s vital to strike the right balance in the team to ensure the levels of financial experience required when dealing with a client’s money. “There needs to be a degree of maturity in our approach to building relationships and significant investment in security and safety of client funds,” he says. “We are reliant on seeking approval from regulators on partnering with banks who store the money for our clients and segregated client fund accounts. There’s a big onus on us to do due diligence on our clients, to have in place processes for Know Your Customer (KYC) and anti-money laundering and fraud prevention. We understand the complexities involved in offering solutions in the financial services domain.”
To manage those complexities, Capital has invested in artificial intelligence (AI) to enable systems capable of analysing client trades and spotting trading patterns known to be associated with practices that can be negative for trading outcomes. “It’s this type of innovation that sets us apart from some of our competitors,” Gowan says of the efforts made to build a modern infrastructure hosted in the cloud via specialist data centres for financial services, such as the Equinix LD4 in London. “It’s our mission to help traders perform better,” he adds. “Educating people is part of being a responsible player in the industry.”
To enhance its AI capabilities, Capital has studied the impact of psychology and emotions in trading to leverage behavioural finance research. “We codify some of these biases into the AI system where we’re looking to assess whether our client's trading patterns are aligned with some of these known biases,” explains Gowan. “People exhibiting an overconfidence bias, for example, may have had a couple of wins so think trading is easy and start taking on a lot more risk. Increasing trade sizes substantially can be risky for your outcomes, so it's really important to stay measured and balanced to avoid wiping out your profit. It’s an easy bias scenario to detect in our system.”
Gowan notes there are many others, such as urgent bias, seen in all areas of life. “We don't like to lose and in the world of trading, you're getting skin in the game, you think something is going to happen, you put a trade on and sometimes your analysis can be spot on, but your timing is not quite right…” Markets can behave irrationally, he adds, either over exuberant or over correcting, so it’s important to be able to accept a small loss to preserve capital and avoid a bigger loss.
“We detect 25 different types of trading bias or behaviour and then provide our clients with personalised insights around the specifics they are exhibiting in their trading. For us, it’s about delivering education in a modern way as opposed to just giving someone an e-book,” says Gowan, who feels time is up for the old school approach. “We have this macro trend right now where everyone is more digitally connected and more easily distracted and people want bite size chunks of information through videos, etc. In that context, when you are grading the markets, you want information that is going to help you with what you are experiencing right now. It's about how we can create those highly personalised, context sensitive engagements with clients to deliver useful information.”
Aligning itself with the new school, Capital launched as a mobile first platform, easy to dip in and out of and keep an eye on the markets. “Understanding the usability and quirks of mobile is really important,” he advises. “The sequential and serial nature of user experiences on mobile makes them more singularly focused on one task at a time, making it very effective for engaging with customers when you don’t have to cater for the need to do several things at once.” User experience is key, as well as maintaining consistency across devices. “This is a core component for Capital. We do all of our user experience and interaction design in-house with the same people working on desktop and mobile, sharing our approach to colours, to interaction and widget styles to keep differences to a minimum.”
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A changing political landscape
Capital covers a wide range of markets across the globe, pulling in all the major industry sectors from the US, UK, Europe, China and Japan alongside the big commodities from traditional industrial metals like copper, precious metals, and oil and gas. “Foreign exchange is another big area of speculation and investment,” adds Gowan. “With the political landscape in the UK dominated by Brexit, we’ve seen a huge amount of interest around what’s happening with commodities with the pound versus the euro and the dollar; against the backdrop of what is happening to UK PLCs and which companies may or may not be affected by a hard Brexit.”
Capital received its licence from the SCA last year, which Gowan cites as a major milestone as the company pushes towards regulation across the biggest jurisdictions on the quest for global expansion of its operations. A big part of that journey lies in educating the user with a dedicated app. Invest Mate allows Capital to break down complex subject matter, so users can keep on track and achieve their goals across a changing landscape.
A secure outlook
Capital’s technology base is primarily hosted on Amazon Cloud Services where it benefits from the inherent security of Amazon’s infrastructure. “We use leading DDoS (Distributed Denial of Service) protection and make a concerted effort to protect our customer data,” says Gowan. “We have full PCI, DSF specification for handling client payment details and being able to take payments on behalf of clients. We have bank accounts with segregated client funds, so our UK entity has a banking partnership with RBF, and our European regulated entity has relationships with Raiffeisen, RBI, based in central Europe. We also have a partnership with Well Pay who are a leading global PSP, Payment Service Provider for taking card payments. All of this is audited by our partner Deloitte.”
Currently live in 20 languages and onboarding clients from more than 50 countries, on the road ahead, global expansion remains the goal for Capital.
FIVE things fintechs must do to keep investors onboard
New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.
Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?
The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.
Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.
Equal access to financial wellness education
Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.
The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.
Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.
For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.
Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.
The rise of AI-Powered Advice
Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?
Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs.
Focus on financial mental health
New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.
It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.
Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.
Gamification for good
The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.
Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.
Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.
The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.