1. Startup

Looking Through Ajaib's Mission to be Retail Investors' First Choice

Ajaib Investors has reached 1.4 million people, 96% are novice investors and 90% come from the young generation

Within two years, Ajaib managed to become the first unicorn in investment or wealthtech in Southeast Asia. Starting the journey with mutual funds, Ajaib's growth skyrocketed when the stock asset class was launched in mid-March 2020, it's all due to the "birth" of many young investors amidst the pandemic.

The approach is quite different from similar players with tendency to adopt a strategy of deepening the mutual funds product range, or enriching the asset class to other instruments, such as gold or cryptocurrencies in order to introduce investment to novice investors.

In the recent Ajaib's media gathering, it is said that the users have reached more than 1.4 million people. Around 96% of them are novice investors, with 90% coming from a young age and the rest are gen Z. Moreover, about 60% of users are actively use the platform and have stock portfolio.

Ajaib Sekuritas' Director of Stock Brokerage, Anna Lora explained, the increasing number of users is also reflected in the total transaction volume of 30 billion per month with 5 million transactions. Before the company acquired Primasia Sekuritas (currently known as Ajaib Sekuritas) the monthly transaction value was in the range of Rp. 1 trillion-Rp 2 trillion, furthermore, the number has grown rapidly to Rp. 6 trillion-Rp. 8 trillion.

"We believe in the strength of Indonesian retail investors as a driving force for capital market investors. In Ajaib, the phenomenon of rising retail investors 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 strategies and products need to be aligned. Ajaib's VP of Product, Aurora Marsye said the application was fully designed to make it easier for novice investors to get into the stock business.

Such features as 100% online registration within minutes; no minimum investment and account opening without initial deposit; comprehensive chart display, in-depth technical and fundamental analysis; and various educational materials and discussion forums, are some of the main features to attract young people.

“We remove all kinds of barriers that have been preventing young investors to get into the stock market. With these various facilities, new users only need courage to invest," Aurora said.

Although the application is designed as friendly as possible for users, Ajaib still prioritizes to educate, considering that stock investments are classified as high risk high return investments. Another approach is to hold regular trainings by utilizing social media platforms for young people.

"Because the target is retail investors, we observe their space, it is currently in the social media. We approach them, try to win the ball. We believe all players will also take this strategy to facilitate easy access for users," Anna added.

Furthermore, it is part of the company's strategy to improve the stock investors' literacy. He said, quality improvement is important, but maintaining the user's quality is equally important.

In Indonesia, the ratio of capital market investors and the population is still unequal. As of November 2021, KSEI recorded 7.1 million capital market investors, increased by 84% from the same period in the previous year of 3.27 people. Of the total investors, 99.51% are retail investors, dominated by the age group under 40 years with 59.81%.

Unfortunately, he could not elaborate further on the characteristics of Ajaib's users, whether investors or traders, to the style and average allocation of funds in investing. “Everything is mixed as it all comes down to the [preference] of each investor. At Ajaib, the portion under management between mutual funds and stocks is even," Anna revealed.

It includes plans to add other asset classes, after acquiring 24% of Bank Bumi Artha's shares. Anna ensures this strategic move will make it easier for Ajaib to develop more products in the future.

Learn from Robinhood

Ajaib's moves are often compared to what Robinhood did in disrupting the financial industry, especially the stock market in the United States. Apart from designing an intuitive, user-friendly and up-to-date application, a key part of Robinhood's strategy is zero commission on stock trading.

This is obviously attractive and helps with user acquisition. In the process, Robinhood monetizes its business with payments for order flow, stock borrowing fees, and subscriptions. In a way, "forcing" the incumbents in the brokerage industry to do the same.

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

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

Behind Robinhood's glittering achievements, this company leaves a controversy. From its convenience application, which 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 went so far as to file a complaint against the company citing "aggressive tactics to attract inexperienced investors."

It is one of the many controversies that burdens the regulators. 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 as we are kind. We live at the intersection of capitalism, democracy and innovation,” said Robinhood's CEO, Vlad Tenev. "And I think it's a very interesting place," he concluded.

Original article is in Indonesian, translated by Kristin Siagian

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