Mobile technology allows direct access to the market. FILE PHOTO | NMG
For millions of ordinary citizens, investing in stocks and
securities has been a long and arduous road that is apparently reserved
for the very few with right connections and the means to access the
stock market.
Once upon a time, participating in stock trading at the bourse was a long and complicated process.
Not
anymore. The penetration of ICT has not only significantly enhanced
efficiency of trading, but also widened access manifold.
In
the 1700s, stock and securities trading was in its nascent stages.
Traders and stock buyers and sellers dedicated entire days to their
activities at specific locations to assure their proximity to market
action and news.
It was worse for investors trying to obtain access to maximum liquidity and opportunities through a variety of asset classes.
Things
started to change for the better over time. The turning point came when
traders, fatigued by gathering under a buttonwood tree on Wall Street
in New York City to exchange stocks and other assets, formed the New
York Stock Exchange (NYSE).
This assured them of round-the-clock access to exchange prospects.
From this, trading still remained the preserve of dedicated
full-time traders and large institutions that could assure large trading
volumes.
This was until the 1990s, when technological
revolution driven by the internet and ever-changing customer needs
bucked this trend. The floodgates opened for retail traders to access an
avalanche of asset and financial opportunities.
Come
2017 and it is no exaggeration to say that we are in the midst of a
defining moment for innovation in financial services, largely driven by
technological development. It is reshaping the investment experience as
we know it. The idea of trading from a remote location while putting in
an order for a trade is no longer a fantasy, the world over.
In
Kenya, this phenomenon has not been lost on the financial services
sector. This is sustained by two things - an ever-changing customer who
appreciates efficacies of technology; and the disruptive mobile
technology that has propelled Kenya’s transcendence as a stronghold of
digital revolution in Africa.
The latest development is
the foray into mobile trading for the NSE. This is now possible
through M-Shares, Kenya’s first-ever USSD-based mobile trading platform
where investors can directly buy and sell shares on the Nairobi
Securities Exchange (NSE) in addition to accessing real-time market
information.
An investment first, mobile trading could
be Kenya’s new investment frontier in the brokerage space. It, indeed,
is a low-hanging fruit of the mobile technology.
Justifiably,
the time is ripe for mobile trading. The numbers do not lie. The recent
Communications Authority’s Telecommunications Quarterly Report provides
the necessary fillip for mobile-only trading.
The
report shows that mobile subscription for Q1 2016 grew by 1.9 per cent
to hit 38.3 million with mobile penetration increasing to 89.2 per cent
from 87.7 per cent.
During the same period transaction
volumes (deposits and withdrawals) grew to 348.8 million valued at
Sh840.3 billion. Mobile commerce recorded 190.3 million transactions
worth Sh312 billion used to pay for goods and services.
Retrospectively, this technology-spawned investing revolution has been tried and tested in Kenya.
With
the mobile usage data, it only makes business sense to cross the
Rubicon on to mobile trading. The crux is the returns it brings forth to
both trader and investor.
First, such a platform
ensures convenience and accessibility to platform to the masses. This,
places the power on the investor – wherever they are, to instant trading
and a wealth of information once only available to a few.
Even better, the platform is accessible to any investor with a mobile phone.
In
addition to this, with the mobile trading concept bridging the traders’
and investors’ connection even closer, transactional and operational
costs are likely to be reduced with services personalised.
Further,
with such a platform, there are ample knowledge building opportunities
such as research tools. This includes online news and price feeds from
the bourse.
Additionally,
mobile traders can take advantage of real time and mobile-first
education services and trader forums so that they can make informed
trading decisions. This spares them fees in specialised courses and
years spent gaining experience to become successful.
Besides,
this gives investors direct access to the market so that they can
transact without having to physically visit the brokers.
Most
important, its feature that enables investors to cash-in and cash-out
using mobile payments is revolutionary since it simplifies trading and
makes it a lot more accessible.
Significantly, such a
platform would contribute highly to the growth and confidence of the
NSE, strengthening its place in sub-Saharan Africa as an innovative
bourse.
On the flipside, with such a novel concept, transparency is still a topmost concern to investors and regulators.
At
the heel of financial crises in the Kenyan financial landscape,
existing myths must be debunked and fears calmed around the product for
investors to make the right decision.
It is time for a
mobile trading platform in Kenya, and nimbler financial institutions
stand the best chance to win on this front.
Karanja is the Head of Global Markets and SBG Securities.
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