FinTechs Use Investing APIs to Help Millennials, Gen Zs Build Wealth

The art of investing is often considered a sophisticated practice reserved for only high net worth individuals who have the resources to play to win.

For millennials and Gen Z customers, the feeling of being excluded from that investing club is even stronger, says David Dindi, CEO at global investment firm Atomic.

“Most of them have felt that investing is not for them because the traditional investment providers such as large brokerage houses and asset managers haven’t made a significant effort to appeal to them, as they’ve not been viewed as substantial clients,” Dindi told PYMNTS in an interview.

FinTechs, neobanks and other consumer-facing companies on the other hand, have realized the potential in offering investment services on their platforms to attract this young audience, but come on to the scene with very limited resources.

“Typically, the obstacles that companies face, especially those that have already established a trusting relationship with their customers and are looking to offer investing services, is that investing is complex, highly regulated activity that requires significant build out, Dindi added.

To bridge this gap, Atomic has launched an investing API that does all the regulatory and compliance heavy lifting for FinTechs and banks to enable them seamlessly integrate investing into their products and services. With their solution, he said there is no need to hire staff, develop expertise, or take on the complex regulatory responsibility that investing entails.

And ultimately, it helps make wealth-building accessible to everyone, including young investors. “What we’ve focused on is to make it possible for this younger type of investors to start building wealth and to be able to have capabilities that are typically only afforded to very high net worth individuals,” Dindi explained.

He added that environmental, social and governance (ESG) investing has emerged as an important factor for younger investors given their preference for supporting only businesses and industries that align with their values.

“Today it’s the only avenue that young investors have to put their money to good causes or to invest in socially responsible ETFs [exchange-traded funds],” Dindi noted, adding that Atomic helps them invest in the underlying constituents of an index so that they can have a lot more control over what’s included or not in their portfolio. “Think of it as a custom ETF of some sorts.”

Investing: High Priority Item

According to Dindi, a key emerging trend is that many banking platforms, whether they’re traditional banks or neobanks, are in a race to become the primary financial relationship for their end users.

And in order to do this, they recognize that offering only one service like banking is not enough and are looking to include investing as well as other financial services like credit, payments or cryptocurrencies that will cater to the needs their customers will have over the course of the relationship they have with the company.

“It really is a matter of combining a set of services that are relevant to the customer at various stages of the financial journey. And that’s where investing essentially becomes a high priority item for many banks and newer consumer finance companies that are in the banking space,” he noted.

When it comes to differences between the U.S. and emerging markets, he pointed to an obvious one, which is U.S. investors’ preference to exclusively invest in U.S. securities, whereas investors in different jurisdictions also want access to stocks listed in their local exchanges or exchanges in neighboring countries.

Per Dindi, it is the reason why in the international domain, the ability to offer not only access to U.S. markets but also access to foreign markets is a very important value proposition. Atomic, he said, has adopted that strategy.

The other difference, he added, comes down to the customization that individuals might want to apply to their portfolios.

Here, too, Atomic enables customers to own the underlying constituents of an index and to build their portfolio in that regard. “It also allows them to build semantic portfolios that might adhere to their religious beliefs, so that’s something which we also see to be an important attribute in the international markets and an international domain,” he further said.

See also: Credit Unions, FinTechs Warm-Up to Collaboration Instead of Competition

Going Global

Moving forward, Dindi said they’ll be keenly focused on the “very large, untapped opportunity to make investing available to people not just in the US, but also globally.” The company already has its regulatory process underway in Europe and plans to go live in the region sometime next year, if not sooner.

Part of that expansion strategy will involve partnering with companies in foreign jurisdictions that are looking to offer these different types of portfolios and wealth-building experiences to their customers, he further said.

He went on to add that their value proposition is not just the underlying infrastructure and the wealth-building capabilities they offer, but it’s also the regulatory piece and RegTech nature of their platform.

“There’s some market where we essentially provide the regulatory coverage for companies and there are other markets where we partner with companies that are licensed and are able to use their licensing to market investing to their end users [but don’t have] the underlying infrastructure to offer these wealth-building experiences to their customers,” Dindi said.

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