When it comes to pioneering fintechs, German corporation NAGA Group is one of the outstanding and prominent examples. The company’s objective is nothing less than to revolutionize the financial sector, focusing on the customer’s desire to have their financials needs met through uncompromising digitalization and innovative apps. Hence, the principle “mobile first” is an essential part of the company’s strategic guidelines as well as setting up new services at a top speed in. Consequentially, NAGA is the first and only financial firm in the world having had an IPO and ICO within its first two years of its existence. Now, with its innovation NAGA Trader, it aims to completely change and democratize the private investment market whose methods seem to be rather old fashioned.
Depending on their individual functions, consultants, analysts, rating agencies and financial journalists carefully examine the market and recommend investment classes, currencies and financial products to investors. If the investor finds the information attractive, the fund, the share or the bond is purchased from a bank or a financial intermediary. This is how the division of tasks has been regulated to date when making financial investments.
There are also, of course, friends – real friends. These also provide tips on investments (whether asked or not) which, in retrospect, may have resulted in break-ups. With this actually quite antiquated approach, it comes therefore as no surprise that up-and-coming fintechs have also set their sights on this market segment: as of late, “Social Trading” has now entered the scene. This links communicative Web 2.0 accomplishments with direct stock exchange trading. Using specialised platforms, investors can now find suitable groups where they can chat, exchange information and follow each other.
This, however, has nothing to do with holiday photos or comments on private interests and hobbies. Instead, followers can see with which investment strategy and with which portfolio someone else is successful. They can then copy these recipes and, for example, use the same app to purchase the stock immediately. With its social trading network NAGA TRADER, the fintech The NAGA Group, based in Hamburg, is one provider and innovative pioneer in this novel idea. With the app, formerly known as SwipeStox, members can follow other members and directly copy their selections of financial products.
NAGA management board member, Benjamin Bilski – listed by Forbes as one of this year’s “30 most important technology pioneers in Europe under 30 years of age” – explains the philosophy behind this method: “It was really paradoxical! Up until now, all possible market participants – who have rather pursued their own interests – recommended financial investments. Discussion forums have also been around for a long time, but there wasn’t any one place where you could systematically follow successful traders – whilst also buying the products at the same time. With NAGA Trader, we’ve changed this.” Everyone can use their amounts and investment decisions to generate their own followers. If you can convince them of the contents of the respective portfolio, the customer receives a bonus.
Comprehensive news, discussions and a TV programme all round the service nicely off. Transactions are settled in classic currencies – or in the company’s own crypto money, NAGA Coin. In turn, the NAGA Wallet – which bundles all NAGA products and services together – can be used to manage and store the values.
Typical social media functionality plays a decisive role in the application’s success: “Every social media platform lives from a large and active community which, above all, is interactive. So, it’s have, follow, link and comment on interesting content. In addition to this and especially for financial products, people have a huge need for information. With NAGA Trader, we have created attractive offers for both”, Bilski told us.
Usually with social trading fintechs, only exchange-traded or regulated products can be bought and sold. However, there are no regulations on the manner of investment consultation itself, nor on the interactive generation of information and opinions. The big question therefore for investors is what mechanisms guarantee that a follower can trust the trader, his/her experience and opinion when replicating this particular portfolio?
This question has already been answered for NAGA Trader, meaning that Benjamin Bilski give the all-clear: “With our self-learning algorithms, we index the users’ activity, their actual performance – and create a so-called risk score. This ensures that traders are ‘real’ and do not trade with automated systems or try to ‘cover up’ trades. For example, some traders keep extra negative positions open to keep up the high level of their own performance based only on positive and closed trades. We’re aware of this, just as much as a regular interaction rate within the application. Because only active and real traders are good traders.”
However, investment funds or asset managers also have to take criticism for their lack of transparency. They’re not exactly known to be independent. In fact, they often pursue their own interests or even trade only a tiny selection of products from one supplier. In general, there are also no forums for discussions where you can comment live on the performance. Advocates of social trading therefore also find that it makes the entire investment process becomes much more transparent – especially as the community with its collective intelligence, can appraise every trader in real time. NAGA management board member, Bilski, therefore regards social trading not only as a successful supplement, but even as “democratisation of the investment market”.