With companies like Etoro, Stocktwits, Cortal Consors with Hopee or Fidor, one of the key theme for Finovate Europe was how financial service can be changed by being developed around the interaction of its users.

One of the consequences of this approach is the possibility for successful amateurs to become a direct competition to established business model.

– EToro (voted Best of Show) is an online Forex broker with a major twist. By implementing social trading, it allows users to copy specific trades from others or even follow a specific trader.

 

As seen in the image above, EToro also has added a gaming perspective to trading, by creating traders ranking and watch lists. For now it seems that what is driving the platform dynamic is mainly the game mechanic, but it could be expected that leading traders may be remunerated at some points for their financial advice (in a way close to Covestor for example).

Note:
* When copying a trade, users get a close equivalent to the precedent trade, but not exactly the same one (but teh same trades when following)
* Etoro assured me they have set a killswitch so that if you follow a trader going “rogue”, they will disconnect its followers’ trade.

– With a similar idea, Cortal Consors presented their trading community Hopee (powered by the german Sharewise). One of the first venture into communities by a broker attached to a major bank (BNP Paribas) , it allows its users (anyone can register online, I am not sure if there is a direct connection for Cortal Consors clients) to share information and compete on their market knowledge. On Hopee, users can propose their bets on the market and are ranked on how accurate their predictions are. Several games keep the community dynamic with for example Catch the monkey, in which users try to beat the stock picking of a virtual monkey.

If anyone has the story of how this concept got validated at the corporate level, I am really interested

However, contrary to EToro, there seems to be a complete disconnect between the Hopee community and actual trading. Maybe in the future, Cortal Consors will further integrate Hopee in its actual services.

– Stocktwits: Based in the beginning on Twitter, but now running more independently (it is is often highlighted as one of the developers that understood early the instability of the twitter ecosystem), Stocktwits is a community of markets fans and specialists that collectively create a new type of financial information service. With a blog network, an online TV, ad-hoc tools for chart analysis, Stocktwits aims at becoming a multichannel source of information that would compete with more traditional players such as MSNBC or Reuters. Also added a set of API, as Stocktwits wants to integrate in existing products such as Yahoo Finance. For the most relevant bloggers, Stocktwits offers a market place for them to sell their analysis.

To summarize, in a short time, Stocktwits has become the leading place of crowdsourced financial information.

The rise of the amateur

Highlighted by Etoro and Stocktwits is the trend named by Charles Leadbeater The rise of the amateur professional and explained in the following TED video.

As technical platforms become more and more social and provide people with a platform for their own voice, content and expertise, the notion that specialists sits within the framework of professional companies is slowly blurring.

For example a recent study has shown that blogger analysts beat professional Wall Street Analysts in their forecast of Apple quarterly results: http://tech.fortune.cnn.com/2010/10/22/the-new-king-of-apple-analysts/

A second factor is the impact of the crisis, which has eroded the idea that working in a company would provide added security and benefits. On the contrary, lifestyle entrepreneurship seems to be on the rise, and is presented as a viable alternative. Monetization strategies could provide the means for the pro amateurs to have a revenue equivalent or better to the one in a traditional corporate world. Amateurs represent an important trend for financial services as they compete with the classic business model of the financial advice / financial information provided by an established company.

The german bank Fidor experiments in social financial services represent an interesting exception to the banking world. I think it deserves a longer post and will probably be headlining Part 3.