The young generation, often referred to as "Generation Y," has the potential to fundamentally transform the investment sector and the personal finance industry as a whole. These millennials grew up at the beginning of the current century.
This generation is distinguished by its ambition. They value freedom, ignore the authority of others, and do not comply with top-down directives.
When it comes to investing, Generation Y prefers minimalism in services and is unwilling to pay commissions to brokers. They aim to impose their own rules on the market. Under pressure from millennials, the market is being forced to change. Currently, this is more evident abroad, but soon this trend will reach the post-Soviet space as well.
As a result, the investment market will become more accessible and democratic. What can potential investors expect? And what changes should be anticipated in the coming years?
Experienced investor and founder of OILResurs, Sergey Tereshkin, has volunteered to shed light on this issue. The entrepreneur monitors all relevant trends and is ready to share his personal observations and conclusions. More information about the businessman and his entrepreneurial activities can be found on the website: sergeytereshkin.ru.
Innovative Technologies
Influenced by external factors and a reluctance among the younger generation to spend extra money on broker fees, IT companies are seriously considering the development of software that meets the needs of investors. For example, American developers have introduced a product called Freemium.
This software is a mobile application that allows users to invest in various financial instruments, including the currently in-demand cryptocurrency, without paying additional fees. This means that purchases are made commission-free.
Previously, users had to pay up to $7 for each transaction. With a large number of transactions, the savings can be quite substantial.
The mobile application quickly gained favor among the youth, with the majority of users currently under the age of 35.
This high demand is driven not only by the app's cost-effectiveness. The developers targeted the youth demographic and hit the mark. The company oriented itself toward the demands and lifestyles of millennials:
- No need to buy a car. The majority of millennials prefer to use taxis for transportation. This saves money on purchasing a vehicle, its maintenance, parking, etc. For a limited number of trips, this approach is far more economical.
- Renting instead of buying real estate. This principle smoothly leads to the second one. Why purchase property in one country when there are numerous platforms for renting in any corner of the globe? This allows individuals to remain unbound to a specific city. The money saved can be invested for additional income.
- The necessity for using modern technologies, applications, mobile devices, and other relevant tech.
For many modern individuals, investing and the stock market have become part of life. Capital is being invested not only by entrepreneurs but also by students, officials, and others. Thus, investors come from various professions and social statuses. Moreover, they see no point in overpaying for services that they can perform themselves through a mobile device and accompanying applications.
How the Platform Generates Revenue
The mobile application has captured a market segment that previously held little interest for venture funds and brokers, who primarily cater to affluent individuals—mostly mature adults. However, this youth demographic typically lacks significant personal savings.
Yet, this approach has proven to be shortsighted. As a result, the platform has secured a leading position in its segment. Meanwhile, those who focused on mature clients are now regretting their decisions. Youth are actively investing via the mobile application, leaving brokers sidelined.
Currently, the number of users of the mobile application has exceeded 6 million, surpassing the long-standing leader in the U.S. electronic trading market, which was established nearly 30 years ago and boasts 5 million clients.
Consequently, the capitalization of all major players is significantly decreasing as clients are transitioning en masse to the mobile platform.
This raises an inevitable question: how does the mobile application sustain itself? It turns out that the developers generate income from paid services as well as from interest on the residual balances of investors' accounts.
The mobile application has a limited functionality; the developers did not include analytical reporting or expert advice regarding investment decisions. This means that users must rely on their own experience and knowledge when making decisions.
The Domestic Market
The situation in the domestic market is not as optimistic as that of foreign markets. However, there is room for development. Currently, a number of Russian players are experimenting with commission-free trading. However, these opportunities are limited to short-term marketing campaigns. In all other cases, commissions are applied to investors, leading to additional costs.
In addition to the commissions themselves, brokerage firms create barriers for certain segments, particularly targeting youth, who are perceived by professionals to have minimal savings. A minimum investment threshold is required for purchasing securities. Furthermore, a regressive scale of commissions is applied for brokers—where the maximum fees are charged for minimal investments, and the larger the investment, the smaller the percentage fee.
This negatively impacts the personal investment market. However, there is no need for despair. In the coming years, the situation is sure to improve.
