Why Stock Trading Apps Are Here to Stay

[Editor’s Note: This is an article by Devin Partida, the Editor-in-Chief of ReHack.com. Devin is a Fintech and crypto writer whose work has been featured on industry publications such as FinTech News, Due, the Swissborg blog and FinTech Insight.]

Stock trading apps are one of the outlying success stories to emerge amid the COVID-19 pandemic. Despite widespread economic uncertainty, throngs of new investors rushed to these services to start buying stocks and cryptocurrencies. The appeal of these apps during the pandemic is easy to see.

As stock prices fell, the simplicity and gamification of trading apps like Robinhood attracted a new class of investors. Fee-free transactions and the availability of fractional stocks gave cash-strapped customers the confidence to start trading. As a result, Robinhood gained 3 million users in the first four months of 2020, and its average daily users surpassed 4 million in June. In his February written testimony to Congress CEO Vlad Tenev said the company had 13 million customers.

These apps may not populate headlines as frequently as a few months ago, but they remain extremely popular. As vaccines continue rolling out and economies reopen, though, will investors continue to trade as much?

The Post-Pandemic Economy Could Encourage Trading

The recovering economy might fuel stock trading apps instead of hindering them. While low stock prices encouraged their initial adoption, positive returns and increasing disposable income could sustain them. Users with renewed financial security may look to buy more stocks, and they will likely use vectors they’re already familiar with.

Users likely won’t see meteoric gains as they did in the GameStop short squeeze, but they with the economy booming they could continue to see positive returns on stocks. These rewards will encourage higher engagement on the apps investors used to purchase the stocks initially.

Then there is the whole cryptocurrency boom. Many of these stock trading apps also offer crypto trading with an ease of use similar to stock trading. Such easy accessibility has likely contributed to the boom in crypto these past few months.

As investors’ peers see their success, it could encourage more first-time users to download these apps. Since consumers will likely be busier than they were during the pandemic, adoption won’t skyrocket as it did in 2020. Still, it could continue to grow, even if at a slower pace.

Stock Apps Face Rising Scrutiny

Not all of the signs on the horizon are promising for investing apps.

Several of these services, most notably Robinhood, have found themselves amid growing controversy lately. Many users have accused these apps of failing to live up to the freedom that they promised.

This controversy arose when Robinhood prevented users from buying stocks like GameStop and AMC. The company initially cited market volatility due to the short squeezing of these stocks as their reason for pausing trades. Users were unconvinced and declared that Robinhood was standing in the way of the open market by not letting them trade.

While Robinhood was at the center of this controversy, it wasn’t the only app to restrict trades. CashApp, TD Ameritrade, E-Trade, and Webull also placed temporary restrictions on some stocks, drawing criticism from users and even politicians. If Congress decides to take action against these stock trading apps their popularity might dwindle.

Notoriety Could Influence Positive Changes

This growing public scrutiny could end up as a net positive for investing apps. While much of their recent publicity has been negative, it’s still publicity, giving them the chance to impress while in the spotlight. These apps could expand their services or introduce new, user-friendly policies in response to criticism, attracting more users.

With more people paying attention to these apps, they could prove valuable tools. For instance, they could serve as an easily accessible record of insider buying, even helping track and prevent insider trading. This is an issue that affects even giants like Apple, so the accessibility and visibility of apps could prove useful.

As apps like Robinhood come under fire, similar alternatives could take the opportunity to replace them. Services could learn from others’ mistakes and contrast themselves with these other apps to attract users. The specific apps people use may change, but the category will remain popular.

Finance Is Becoming Increasingly Digital

If nothing else, stock trading apps’ popularity comes as part of a natural progression. Recent events aside, these services answer the growing demand for digital, instantly accessible resources. Investing apps would have become increasingly popular even if it weren’t for the pandemic or GameStop short squeeze because that’s where finance was already going.

Millennials and Gen Z are making up an increasingly substantial portion of investors. These generations are also digital natives. As such, they expect digital services in virtually every sector. This trend has already infiltrated finance, as 99% of Gen Z uses mobile banking apps for a broad range of actions.

Stock trading apps are growing in popularity because virtually every type of app is. The move to mobile operating systems is a trend that encompasses nearly every industry, not just finance and investing. That’s where the world at large is heading, so it’s unlikely that a small controversy will end this movement.

Stock Trading Apps Likely Aren’t Going Anywhere

Investing apps might have skyrocketed amid the pandemic, but they are more than a trend. They’re part of a broader, industry-wide movement that will long outlast both COVID-19 and current setbacks.

Apps like Robinhood may see slower growth in the future, but it will be growth nonetheless. The world is becoming increasingly digital, and that includes stock trading. While the specifics may change, investing apps as a concept are here to stay.