The ability to dabble in the stock markets was traditionally seen as the preserve of what we might call “grownups,” or professional investors with fat salaries and lots of savings to wager.
It’s a stereotype that DriveWealth is rapidly spinning on its head as it pushes a concept of “embedded finance” that makes portfolio-building through fractional investments attainable for the masses. Not only does the company make trading easy and accessible, but it also uses the method as a tool to educate consumers in matters of financial literacy.
“Embedded finance is the ability to work inside a financial services ecosystem, like digital wallet, and have all of these financial app products available at the flick of a finger,” said DriveWealth CEO Bob Cortright in an interview with Karen Webster. “It’s disrupting the way the markets have operated for a long time, allowing people to invest in a notional way with whatever they happen to have in their pocket.”
DriveWealth facilitates embedded finance through an application programming interface (API)-based infrastructure platform that enables its partners to make global stock markets accessible from any application. The company aims to make stocks and shares as easy to buy as a cup of coffee, and it has set itself the mission of democratizing investment opportunities by giving consumers access to U.S. markets with as little as $1.
“Access to these markets, if you’re outside the U.S., was only really available to the very rich,” Cortright said. “It’s expensive, and moving money is expensive too.”
What DriveWealth is disrupting is not so much the traditional brokerages, but rather the ability to move money affordably and efficiently through new payment mechanisms and enable assets to be exchanged with ease.
“So, let’s say you’re in Nigeria and you have some bitcoin and you want to buy Nike stock, you can do it simply by transferring, selling based on bitcoin and buying Nike stock,” Cortright explained. “It doesn’t have to be done in steps; we make it very simple. You have $50 worth of bitcoin, and you sell that bitcoin for $50 worth of Nike.”
Embedded finance works in other ways too. For example, a consumer can go out and buy a pair of Nike sneakers for $100 and then receive $5 worth of Nike stock back.
DriveWealth is making the investment experience less intimidating and with that, it’s opening the market to a much younger demographic. It’s an audience that’s investing with much smaller amounts, with the average trade on DriveWealth’s platform being around $250. This kind of fractional equities trading, as the company refers to it, is unlikely to make too many millionaires in the short term. But participants acquire experience and with that, greater financial literacy as they learn from their successes and their mistakes.
“People were crying about the GameStop drama and all these young people straightening stocks with $500,” Cortright said. “That was a good thing because it’s educating people as to where their mistakes were made. It’s much better to have someone make a mistake in their young 20s and teach them about financial markets. So, when they’re older and they start making real money, they have more sophistication around financial services.”
While educating the masses, what DriveWealth is really building is a kind of ecosystem in which stock becomes as fungible as cash itself is. Through the method, it becomes possible to tip a taxi driver with a few dollars in fractional shares of a stock, for example. So, in that sense, it has greater value than cash in many ways, as it’s an ecosystem where assets appreciate as opposed to a fiat-based ecosystem which doesn’t hold value over the long term.
Cortright said it’s a more engaging ecosystem too in many ways because it makes people think much more carefully about the purchases they make. By building a portfolio rather than just managing cash in different accounts, people get a much better perspective of where they are financially.
People need that perspective too, he argued, noting that financial education in the U.S. leaves a lot to be desired.
“In the U.S. we have this educational system all around different successes and all this wealth, but we don’t teach people about money,” he said. “Fractional investments are a good way to get people engaged, to learn and to understand what it means to balance consumerism and savings. I really think this is the holy grail solution.”