Stock exchanges, cryptocurrency trading and trying harder

Until a few years ago, Avis – the second-largest car rental firm in the US for much of the last half century – ran an iconic advertising slogan: “We’re No. 2. We Try Harder.” Given my soft spot for underdogs, I thought it was brilliant. Embrace reality, turn a negative into a positive and move the goal posts.

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I was reminded of that this week when Germany’s no. 2 stock exchange revealed a planned launch this autumn of a cryptocurrency trading app. Börse Stuttgart’s subsidiary Sowa Labs has developed a mobile platform that enables clients to trade bitcoin, ethereum, litecoin and ripple. Onboarding will supposedly take minutes, and although initially only available in German, apparently an English language version is in the works (the company also runs the second-largest stock exchange in Sweden). Perhaps even more interesting, the app will use “artificial intelligence” to sift through crypto Twitter and select those tweets that best indicate price trends (can’t wait to see that).

While a distant second to Deutsche Börse in terms of turnover, Börse Stuttgart is – according to its website – the market leader for exchange trading in corporate bonds (as opposed to over-the-counter trades, which dominate volume). What’s more, and this is especially interesting given its cryptocurrency strategy, Börse Stuttgart is Germany’s leading exchange for retail investors. Its website claims:

“Ground-breaking ideas for the benefit of retail investors are a tradition at Boerse Stuttgart.”

Although founded as far back as 1861, it seems to have been eager to embrace new technologies, offering “best size” and “best price” practices for the retail market, long before most of its peers. And now, cryptocurrency trading.

As well as the empowering idea of the second largest having to try harder, another underlying force is at work here, one that we’ve seen replicated across the finance sector: the incumbents are the best positioned to take new technologies mainstream.

The economist Joseph Schumpeter posited, almost 100 years ago, that large firms are more enablers than barriers when it comes to technological development. Their reach and economic power gives them a huge advantage when it comes to “appropriating” technology, further consolidating their position and further centralizing the sectors in which they operate.

True, the landscape has changed. The growth of computing and open source technologies has distributed access to new ideas among a much broader range of actors. Startups are gaining significant clout, and are likely to become the new incumbents as market structures shift.

Yet, the current incumbents seem to be aware that embracing new technologies is not only good for the bottom line, it could also become a matter of survival. And, in the process, the technologies reach a wider audience.

We’re seeing this in the cryptocurrency sector. Most commercial banks, central banks and stock exchanges are running blockchain trials and designing proofs-of-concept. And in cryptocurrencies, while many institutions are still keeping a cautious distance, a few brave innovators are incorporating new services to improve access to a market that is obviously not going away.

Is this just another case of a financial institution using “cryptocurrency” as window dressing to enhance its profile, or is there significant demand amongst Börse Stuttgart’s retail client pool for cryptocurrency trading? According to an internal survey, there is – and the company’s record on innovation and retail focus points to a genuine interest in improving the customer experience when it comes to a new asset.

Beyond the easier access to cryptocurrencies, a more subtle change could result: the increased perception that bitcoin, litecoin and peers are neither a threat to the established system, nor a clandestine investment opportunity. The backing of a large and reputable financial institution brings what was once a niche activity into the hubbub of mainstream markets – and, it perhaps further entrenches these assets’ role as trading vehicles rather than decentralized enablers or financial disruptors.

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