What’s going on?
Valuations of some of the most popular investing apps have tumbled up to 70% from their peaks this year – but there’s an opportunity for these businesses to come back even stronger.
What does this mean?
Fintech valuations hit a peak in 2021, partly thanks to pandemic-induced investing enthusiasm, waves of government cash support, and a bull market all helping to drive user growth for investing apps. But nowadays, the landscape looks very different: the end of Covid restrictions and rising interest rates have contributed to a sharp reversal of the positive trend of user growth and activity for investing apps.
UK-listed trading platform CMC Markets said in June it had seen “weaker” investment revenues as a result of “subdued market conditions”, while US-listed investment app Robinhood has seen its stock price drop some 70% from its June 2021 level – alongside a drop-off in its “monthly active users”.
The rout has extended to investment apps that are privately held too: Freetrade, for one, is set to cut its valuation by 65% in its forthcoming funding round, while Revolut – which offers stock investing alongside other banking services – has seen its investors slash the value of their holdings in the firm by between 40% and 46%.
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Why should I care?
One way to interpret these lower valuations is that investors are essentially saying to investing apps, “lower activity means lower revenue, which means lower profitability and is therefore a less valuable business”. But investors are notoriously forward-looking, so investment apps that can demonstrate they’re set up to take advantage of the long-term opportunity – to engage, retain, and educate modern investors – leading to more resilient fundamentals (read: higher, more stable revenues and stronger profitability) than they’re currently being given credit for could be poised to show significant upside over time.
What’s the opportunity here?
In your product: Meet modern investors where they are.
Sure, activity might be down across the board, but there are pockets where retail investors’ interest is rising – so it makes sense to have an offering that serves customers what they want. At the moment, that means exchange-traded funds (ETFs), with over 70% of modern retail investors planning to take advantage of the low-cost diversification and exposure to themes ETFs provide. It also means “alternatives”, with investors looking outside of typical stock and bond market investments for returns. And, as interest rates rise further still, high-interest savings accounts and money market funds are also an area of increasing interest among retail investors.
In your engagement: Content turns dormant users into active ones that generate high ROI.
A more informed user – one who’s empowered and educated – is more likely to be an engaged user and, in turn, is more likely to be an active user, generating higher “average revenue per user” (ARPU) than dormant customers, making a big difference to a firm’s profitability. And content can play a major role in doing just that. See, Finimize content is educational, practical, and actionable – and drives market-leading engagement. In fact, 90% of Finimize members say they’ve learned something from us, and 40% have taken action on the back of our analysis. That means our content can catalyze increased investment as well as higher engagement rates. The takeaway: a relatively small outlay on Finimize content can amount to a needle-moving measure for investing apps, and quickly drive returns on investment of over 100%.
Let’s say you spend $50,000 on a Finimize content license. All else equal, you’ll expect to see an increase in user engagement – and along with that, more active, better-informed customers who are more likely to transact. Even if that pushes only 1,000 of your dormant customers to become active again and generate an ARPU of $50, you’ll have emerged with a 100% ROI. If you can reactivate more users than that – or drive a higher ARPU – then your ROI jumps pretty dramatically. And that’s not to mention the other benefits a strong content offering brings you – like improved SEO, brand loyalty, and an edge over content-deficient rivals.
With a content strategy in place from a high-engagement-driving, trusted source, you’re well on your way to improving business fundamentals, which’ll be reflected in your valuations whether public or private – and sets you up to build a successful business over the long term. Let’s start the conversation to get you going… let’s talk.