Seeing Magical Efforts Become the App of Choice for Retail Investors

Within two years, Magic managed to bear status unicorn first in the field of investment or wealthtech in South East Asia. Starting its journey with mutual funds, Ajaib's growth accelerated when it launched a stock asset class in mid-March 2020, none other than because of the "blessing" of the birth of many young investors in the midst of the pandemic.

The approach taken is different from its peers who tend to adopt a strategy of deepening the product range of mutual funds, or enriching the asset class to other instruments, such as gold or cryptocurrencies in introducing investment to novice investors.

In mediagathering held by Ajaib some time ago, it was revealed that now Magic users have reached more than 1,4 million people. Around 96% of them are novice investors with a composition of 90% coming from a young age and the rest are gen Z. Then, about 60% of users are active, who have a stock portfolio in Ajaib and trade in it.

Director of Stock Brokerage Ajaib Sekuritas Anna Lora explained, the increase in users is also reflected in the transaction volume of 30 billion per month and 5 million transactions. Before company acquired Primasia Sekuritas (now called Ajaib Sekuritas) the monthly transaction value is in the range of Rp. 1 trillion-Rp 2 trillion, once it was acquired by Ajaib, the number has now grown rapidly to Rp. 6 trillion-Rp. 8 trillion.

“We believe in the strength of retail investors in Indonesia as a driving force for capital market investors. In Ajaib, the phenomenon of adding retail investors now comes from second-tier cities," he said.

Application for novice investors

In accordance with the company's mission to be known as a friendly application for novice retail investors, all Magic strategies and products need to be aligned. Ajaib VP of Product Aurora Marsye said the Magic application was fully designed to make it easier for novice investors to enter the world of stocks.

Features like 100% account registration online in minutes; no minimum investment and open an account without initial deposit; comprehensive chart display, in-depth technical and fundamental analysis; and various educational materials and discussion forums, are some of the mainstay features to attract young people.

"We remove barriers which has been preventing young investors from entering the stock market. With these various facilities, the capital that new users need to prepare is quite bold," said Aurora.

Although the application is made as friendly as possible for users, Ajaib still prioritizes the education side considering that stock investment is an investment high risk high returns. One approach that is often taken is to hold regular trainings by utilizing social media platforms that many young people visit every day.

"Because the target is retail investors, we see where they are playing, now they are playing a lot on social media. We approach them, pick up the ball. We believe that all parties will also take this strategy to make it easier for users to reach," added Anna.

This step, he continued, is part of the company's strategy in improving the literacy quality of stock investors. According to him, an increase in quantity is important, but maintaining the quality of users is equally important.

In Indonesia itself, the ratio of the number of capital market investors to the population is still far unequal. As of November 2021, KSEI recorded 7,1 million capital market investors, up 84% from 3,27 people in the same period in the previous year. Of the total investors, 99,51% are retail investors which are dominated by the age group under 40 years with 59,81%.

Unfortunately, he could not elaborate further on the characteristics of Magic users, whether they are investors or not trader, to the style and average allocation of funds in investing. "Everything mixed because this all goes back to the [preference] of each investor. In Ajaib, the portion under management between mutual funds and stocks is balanced,” concluded Anna.

It also includes plans to add other asset classes, post-capture shares Artha Earth Bank by 24%. Anna just ensures that this strategic move will make it easier for Ajaib to develop more products in the future.

Reflecting on Robinhood

Miraculous moves are often compared to what Robinhood did in disrupting the financial industry, especially the stock market in the United States. Apart from designing intuitive applications, user-friendly, and nowadays, a major part of Robinhood's strategy is zero commission on stock trading.

This of course attracts a lot of attention and helps with user acquisition. To do this, Robinhood monetizes its business with payments for order flow, stock borrowing fees, and subscriptions. In anticipating this strategy, “forcing” the incumbents in the brokerage industry to do the same.

Previously, incumbents such as Fidelity, Wellington, Charles Schwab, and ETrade, is the ruler for the retail investor segment. ETrade and Schwab even account for more than 40% of the brokerage industry's total online revenue, according to IBISWorld in 2019. But now Robinhood has managed to attract more than 21 million active users, doubling from 2020, surpassing Schwab's market share last year.

In creating demand Recently, Robinhood has also succeeded in acquiring users from various races, from previously dominated by whites and experienced investors who are closely related in the stock world.

Behind the glittering achievements of Robinhood, this company is also not free from controversy. From the ease with which Robinhood's application uses gamification, the company seems to "underestimate" the educational aspect, especially since Robinhood's main target is novice investors. Regulators in the state of Massachusetts even went so far as to file a complaint against the company citing "aggressive tactics to attract inexperienced investors."

That's just one of the many controversies that have made local regulators sweat. According to SEC officials, bringing retail investors more access to capital markets is a good thing, as long as the core principles for protecting investors are not altered by apps that encourage active trading through behavioral cues.

“Our belief is, the more we lower the barriers to entry, the more we level the playing field and allow people to invest their money at a younger age, the better our economy will be and the better the society will be because we are kind. live at the intersection of capitalism, democracy and innovation,” said Robinhood CEO Vlad Tenev. "And I think it's a very interesting place," he concluded.