Millennials, Gen Z seek better investing experience via blockchain

By Joe Jowett, Co-Founder and CEO of trading platform StrikeX

Traditional financial institutions don’t just have legacy systems and infrastructure to contend with, they have a legacy of financial disasters that have impacted the lives of millennials and Gen Z, fuelling an appetite for alternative financial service providers, including investment solutions built on blockchain technology.

This trend towards alternative trading platforms and new investment thinking is in full flow, and if the City of London is to continue to enjoy its status as a global financial centre, fostering the innovation that is the lifeblood of the financial services industry, then it needs to embrace the changes that are sweeping through the sector.

Millennials’ life experience has been coloured by a trail of financial scandals, from Enron to Madoff to Libor rigging. Alongside, they have seen the collapse of numerous banks during the world financial crisis of 2008, the result of which was a sustained period of austerity. Throw in money laundering, tax avoidance schemes and the questionable clientele of some financial institutions, and it doesn’t paint a pretty picture. London, to an extent, has suffered reputational damage as result.

Let down by traditional banks, it’s not surprising that following the crisis, 71% of millennials surveyed for The Millennial Disruption Index said they would “rather go to the dentist than listen to what banks are saying.” That threadbare relationship has continued, opening the door to challenger banks, insurers, wealth managers and so forth over the past five years. And since the start of the pandemic, a surge in interest in cryptocurrencies has steered many of them towards digital assets.

Prolonged austerity, rising student debt, low wage growth and soaring property prices have left this generation – those in the 20-40 age-band – looking for a new way to manage their investments. They want better returns and a way to plug the gap in their savings. Investor surveys show their appetite for risk – a quick return – has grown.

While millennials and Gen Z investors look for something new, London has an important role to play as a financial hub, a place of expertise and large talent pool. Importantly it’s a major centre for raising capital and effective light-touch regulation.

Market let-downs push investors towards blockchain

Other research shows that the pandemic prompted many people to take greater control of their financial planning, looking at how best to invest to boost their incomes and build up their savings. According to US brokerage Charles Schwab, millennials and Gen Z investors now account for more than two thirds of all retail investors.

Most of the new trading accounts are for digital platforms. Overall, retail stock trading remains above pre-pandemic levels, while global e-trading volume topped $8 billion in 2021. At the same time, the global cryptocurrency market is now worth $3 trillion – after just over a decade in existence.

For new investors, a digital user experience that is absolutely secure and offers borderless 24/7 market access, speed, no middlemen and low or no costs, are all features they seek as they break with traditional financial service providers.

An example of what worked for millennials was the trading platform Robinhood. Commission-free for share transactions, it lowered the threshold for entry very significantly. By 2015, 80% of its userbase were millennials. But in early 2021, amid the GameStop “short squeeze”, it limited purchases of GameStop and other “meme stocks,” reportedly to ensure it met clearinghouse deposit requirements.

Other platforms also limited or suspended trading, unable to deal with the volume of transactions. Millions of people lost money and it shattered the illusion of a fair and open marketplace for all. Since then, many investors have moved to alternative assets like crypto and NFTs, where the underlying blockchain technology enables frictionless peer-to-peer trading without the need for intermediaries.

Tokenisation revolutionises investing

At StrikeX, it became very clear to us that technology can provide an alternative to the outdated, centralised brokerage platforms that are so commonplace, and transform trading into a truly open and accessible market.

Blockchain technology is being adopted in an ever-growing number of sectors, including art, real estate, banking and finance, and supply chain management. Another transformative use case is the tokenisation of assets. As non-fungible tokens (NFTs) have demonstrated, anything can be tokenised to establish an immutable record of ownership on the blockchain.

Tokenising stocks and bonds, as well as commodities and real estate, can revolutionise the investing process from the ground up. It allows for 24/7 trading, irrespective of global stock exchange cycles, because transactions can be recorded on the blockchain even when markets are closed. This helps transcend geographical boundaries, making markets accessible to people at any time and any place.

The underlying automation of the blockchain allows for optimal transaction speeds while minimizing transaction fees. As well, it guarantees transparency and decentralisation because information on the blockchain is accessible and verifiable by all, thereby taking data ownership out of centralised control.

One other advantage it offers is that it allows for all assets, from stocks to crypto, to be traded on one single platform, thereby opening the entire market to investors who might otherwise be hampered by having to keep track of multiple portfolios on several platforms. What’s more, tokenised assets can be fractionalised, allowing investors to purchase partial shares, making diversification possible at lower cost.

Greater levels of investment diversification possible

Asset managers always – rightly – talk about the need for diversification across asset classes, regions and currencies. Tokenisation does just that, except it runs further and wider with far greater ease.

TradeStrike, the flagship product of StrikeX, is scheduled to launch in late 2022. It will deliver the combined benefits of tokenised trading. As an exchange, it will be able to future-proof online retail investing and fix the issues that many exchanges encounter today. It will offer tokenised assets, including stocks, NFTs and real estate, as well as cryptocurrencies, all via one unified interface.

It’s a system that will enable traders and investors to access assets previously out of their reach and build diverse portfolios to suit both short and long-term investment strategies. It will provide 24/7 trading, as well as cross-border transactions, that allows access to assets previously restricted because of their geographical location.

Special attention has been given to ensuring TradeStrike’s user interface is intuitive and clean, helping to break down barriers that can impede good investment decision-making. Educating traders about the risks and rewards of investing is very important, so the new platform will have a library of user-friendly learning materials designed to equip beginners for their investment journey.

Alongside this platform, the importance and value of effective regulation to support such innovation, while protecting investors, cannot be understated. London is not just a global financial centre and technology hub, it has a reputation as an innovator on regulation. The City may have it traditions, but there’s nothing sentimental in the way it pushes the development of its financial services sector.

Against that backdrop and in the knowledge they are working on robust well-regulated infrastructure, millennials and Gen Z can take matters into their own hands using solutions such as TradeStrike that are fair, secure and designed with the user in mind. The appetite is clearly there; trading volumes are sure to rise in coming years.

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