As the fintech sector faces increasing public scrutiny, can personal investing apps continue to grow a loyal base?

SSR investigates how fintech start-ups are engaging users to win—and keep—their trust.

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John Balessari

The Next New Thing: Fintech

Robinhood—a darling of the fintech world since it amassed a 1-million-user pre-launch waitlist in 2015—became a household name during the pandemic. With fee-free trading on a dead-simple interface, the app made first-time investors of millions stuck at home and flush with stimulus cash.

By the end of the year, fintech apps had added an estimated 10 million users and $550 million in revenue, six times what they made in 2019. This meteoric rise established personal finance apps as the next new thing, clearing a market space that is now flooding with players.

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Elena Lacey

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But, Robinhood’s day in the sun has already begun to cloud. After building its reputation on “democratizing trading,” the platform came under suspicion as users caught whiff its loyalties might lay with Wall Street after all.

In December 2020, the SEC filed charges against Robinhood for misleading customers and failing its duty of best execution. The charges stem from the app’s “payment for flow order” (PFOF) profit model, which sells user trade requests to market-makers like Citadel Capital—meaning Robinhood works to find the best deals for hedge funds at the expense of its users. In February of 2021, representatives of the House Financial Services Committee pilloried Robinhood CEO Vlad Tenev for failing to protect retail investors and gamifying trading.

Things came to a head during the GameStop meme-trading frenzy when Robinhood abruptly halted trading on the stock. The move struck some as a deliberate attempt to protect Citadel Capital—one of Robinhood’s largest clients and a short-seller of GameStop—sparking another SEC investigation.

 

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Paul Strand

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Elena Lacey

Finance’s Second Act: New Look for an Old Business

Whatever their service offerings may be, new fintech start-ups share this: an insistence that they’re not your father’s financial institution.

 

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Javier Jean Youth

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Looking to cash in on millennial distrust of banks and financiers (think: Occupy Wall Street, Bernie Sanders, Wolf of Wall Street), fintech brands are practicing applied empathy and positioning themselves as allies disrupting a frustrating, exclusionary, and even corrupt industry. Their brands follow suit, stressing accessibility and approachability: fee-free trading, easy-to-use interfaces, and jargon-less copy. Below, SSR investigates how fintech apps are differentiating themselves as the banking, loans, and investment option for millennials.

  • Robinhood (“Democratize Finance”)

What critics call gamifying trading, Robinhood would call giving everyone a piece of the Wall Street pie. Their social media content emphasizes relatable users’ personal investing success stories. A 30-second Super Bowl spot (“We’re All Investors”) ran folksy vignettes of everyday life in small-town America: babies in cribs, corner stores clerks, country bars. It closes with a millennial making a trade as she waits for her coffee in a diner. Not a central business district or stock chart insight.

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  • SoFi (“Don’t Bank. SoFi”)

Empathizing with young professionals struggling to cut through the noise and make smart financial choices, this loan startup is pushing the message that Millennials know better than to go to a traditional bank. Advertisement messages include ones to refinance (“refi”) student loans, get paychecks “two days early,” take out a mortgage because “you’re too smart to rent.” Channeling Jenny Holzer, one ad projects the words “Even banks don’t want to be banks” onto—yes—a bank.

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  • Invstr (“Invest Smarter”)

What Robinhood is to /r/wallstreetbets, Invstr wants to be to /r/investing. “Don’t be stonks guy!” instructs one of their ads. The trading is fee-free like Robinhood’s, but tools like their Fantasy Investing platform (where users trade with mock money) and social media campaigns like Teach Tuesdays stress learning the ropes before jumping in. More DD, less YOLO.

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  • Acorns (“Invest, Earn, Grow, Spend, Later”)

Acorns differentiates itself on a unique service offering: just sign up and your spare change is automatically invested for you. Endorsements from Dwayne ‘The Rock’ Johnson and Danny Garcia play the rags-to-riches angle, and inspirational quotes on social media ride the #hustleculture wave.

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  • Kraken (‘Bitcoin & Cryptocurrency Exchange)

A platform specializing in cryptocurrency trading, dressed in cyberpunk visuals. The messaging stresses the availability of new crypto-tokens, easy-to-use interface, and low barriers to entry (“Get started with as little as $10”).

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  • Public (‘The Investing Social Network’)

Public positions themselves as foils to Robinhood, looking to empathize with those who lost faith in the startup after a summer of controversy. They made hay of Robinhood’s SEC charges by dropping PFOF as a profit model, and are emphasizing transparency (website portals like “How does Public Make Money?”), community (you can follow other investors), and learning (long list of articles on their website, including several on the volatility of meme stocks).

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John Clarysse

Earnings Call: Summary and Takeaways

What’s working, what’s not, and how can fintech startups earn trust in a skeptical marketplace?

Applied Empathy

The brands doing best are those listening best and giving the people what they want, whether fun (“gamified”) trading (Robinhood), access to crypto markets (Kraken), or thought-free investing (Acorns). So too is Public’s empathy with those looking for transparency working—but it remains to be seen how many users actually care.

Talk the Talk

Speak to millennials by speaking like them. Brands are capitalizing on mistrust of traditional financial institutions: Robinhood is “Democratizing Trading,” SoFi quips that “Even banks don’t want to be banks,” and Public is asking the questions many had of Robinhood, like “How does Public make money?”

Keep it Simple

Dead-simple interfaces and friction-free service delivery are indispensable. Robinhood’s success has much to do with just how easy it made trading, and Kraken and Acorns are finding success by asking less of their users. Meanwhile, SoFi’s struggles to make its UI simple and its service offerings clear are among its biggest challenges.

Buy the Hype

As ever, the startups that caught the wave early lead the pack. Robinhood—despite the controversy—is still outpacing the competition, and Kraken’s quick jump into the emerging crypto market put it in a promising position.