Presently, if you do not have a stock broker whom you are paying expensive fees looking over your shoulders, your chances of making profit on the stock market is close to zero.
Nevertheless, experts have recently said that financial technology (Fintechs) firms, through participation, can help more Nigerians understand what goes on in the stock market. Aside rebranding the market system, Fintechs can also leverage the platform to raise needed funding for their businesses.
It is in view of the latter; the Fintech Association of Nigeria (FTAN) whose members cut across banks, research firms, incubators and accelerators, academic institutions, and Fintech start-ups began seeking partnership with the Nigerian Stock Exchange (NSE) in December. Fortunately, the NSE disclosed their plans to reposition the Alternative Securities Market (ASEM) as a Growth Board in 2018. The repositioning will provide listing opportunities and capital formation for start-ups, small businesses and venture capital companies.
During the Fintech Nigerian Conference which held last week Thursday and Friday, Ade Ewuosho, head Market Services, NSE reiterated the commitment to segment the market in order to provide access to capital for small businesses.
Opening up the stock market for Fintech is critical, not just for regulator and the start-ups, but also for the national economy and the financial inclusion drive. The market as it is structured currently is too difficult for ordinary investors with little knowledge. While going through stock brokers appears the only logical way of making any profit, the transactions fees are in some instances prohibitive. The option of direct stock purchase has also been mostly cornered by bigger players with rich data which they have exclusive access to. For instance, the Bloomberg Monitor is the world’s most renowned stock market data system. For $24,000 a year, a trader can have the data set up and gain access to all information they need to make the most strategic stock market decisions.
To make the right investments on the Nigerian stock exchange or any market, you need the right information that suggests that profit is likely, and that the potential for return justifies the amount of money pledged. This is where Fintechs can come in. Fintechs can provide open-source technology that enables everyday people the opportunity to deal with their finances at their convenience and reduced rates.
New technologies can expose the data-rich world of the stock market, revealing crucial investment information to Nigerians who are interested in investing in the market. Blockchain technology which many fintechs are already exploring can also help the market reduce cost while at the same time decentralising information.
In 2017, the leading US stock exchange Nasdaq underscored the importance of leveraging blockchain: “The potential to enable stock exchanges to significantly reduce cost, complexity, and increase the speed of trading and settlement processes in a secure manners, has the biggest names in the industry exploring blockchain technology.” The Nasdaq has since commence series of tests aimed at exploring fintech solutions particularly with relation to blockchain.
The German stock market operator Deutsche Boerse, released a report in 2016 that highlighted the potential threats that blockchain poses to the stock market. In the report, the operator noted that potential impact of fintech on market infrastructure incumbents highlights the opportunity for providers in partnering with these new innovative ventures.
Fintechs can also provide robo-advisors or virtual advisors that can provide entre point information to new Nigerian investors. These virtual advisors will enable democratisation of the space in terms of access to information. Some fintechs around the world are already offering the technology to their clients.
Automated investment management tools are gaining relevance in other countries as the industry globally continues to shift towards automation in asset allocation and rebalancing.