eToro’s expansion into Asia: Another VC investment, another upward move in APAC. An Interview with FinanceFeeds in Shanghai

South East Asia is a burgeoning region for the online trading industry’s astute and advanced companies which have gone beyond the traditional retail FX model.

The region is not only vast and is home to a large number of young, investment-oriented, analytical retail investors, but is also aligned with China in so many ways in terms of its relationships, demographics and business structure.

Southeast Asia is the next hot topic in the online trading market, and is one of the most important emerging markets in the world.

In terms of economic growth, with a population of over 700 million across the region and average economic growth rate of 5% in different countries within the region, Southeast Asia provides massive opportunity to online trading platforms to introduce their business into the region.

FinanceFeeds reconvened with Paul Henry Familiaran, eToro’s Southeast Asia region head, to look at the company’s expansion into the APAC region in greater detail, reviewing its dealings over the past year.

Since 2007, eToro has always been establishing itself as the world’s leading social trading network. eToro has several million users from around 140 countries. Could you share the strategic development plan and vision of eToro?

eToro’s vision is simple – To open the global markets for people to trade and invest in a simple and transparent way. In order to achieve that we continue to invest in 3 variables that has made us successful – simplicity, social trading and our patented copy trading element.

Our platform solves the mental stress of entering a new and unknown territory, which most novice investors experience when having a first look at other trading platforms. To be social about trading means having the potential to improve skills faster, compare strategies, share advice, ask questions with other traders and to receive early feedback on your trading success.  

Social trading is democratizing traditional wealth management, some could call it ‘portfolio management 2.0.’ As for the copy element, when you log into our platform, you see thousands and thousands of traders profiles. Every trader’s activity and history are automatically published, so users can simply copy top investors.

Specific to Southeast Asia, I am spearheading a project to localize business processes. This involves having a localized website, platform, communication channels and having our onboarding teams accept local documents for account verification purposes. We are also in the process of adding more safe and convenient funding options that are unique to each SEA country we provide services in. Branding campaigns and events will also be a main focus.

Brand awareness not only helps us grow our organic business, but also our partnership business, by introducing broker and affiliate partner programs. Lastly, based on my years of experience in the industry, I can say that talented people, like the ones eToro employs in the region, are the ‘glue’ of a successful business. It’s the most essential ingredient when executing a game plan. To have a staff who knows each country’s culture, investment needs, effective marketing channels and business practices makes business development easier.

It’s widely known that the model of “social trading + copy trading,” when done correctly, can make trading easier and more transparent. It combines traditional trading with internet media and lowers the entry barrier to the market. However, it can also carry some risks relating to signal delay, fluidity and execution. How does eToro avoid those risks?

eToro is the category leader in social and copy trading. Research has shown that copy trading will play a major part in the future of money management. To mitigate these risks, eToro only offers products that are heavily traded globally and deemed sufficiently liquid by our own internal dealing department.

eToro heavily invests in backend technology to improve execution, by working with a number of liquidity providers, who provide us the best available prices, coupled with deep liquidity. This is one reason why copiers on our network will receive the same price as the signal provider when opening a new trade.

eToro has a wide range of instruments on its platform, which means investors have a lot of choices. For investment companies or high net-worth clients, diversifying investment can not only lower risk, but also increase the gain potential in the long-term. How many types of instruments are open to SEA traders on the eToro platform? Are there any portfolio investment products?

eToro provides clients access to more than a thousand investment instruments, such as currencies, commodities, individual stocks, major global indices, ETFs and cryptocurrencies.

While users can see other traders’ statistics and simply copy them, what we learned is that a lot of users find it hard to pick and choose from different traders. CopyFunds*, an eToro product offering a diversified strategy, launched with the simple question, “which trader or market themes are best to invest in?” CopyFunds investment strategies allow users to take a more “lean back approach.” So rather than just copying one top trader or trading one stock, you are spreading your risk. Clients have access to some of our investment strategies: TopTrader CopyFunds, Market CopyFunds and Partner CopyFunds.

• Top Trader CopyFunds: These investment strategies bundle several eToro traders into one long-term investment option, managed by the eToro Investment Committee. Some of these products utilize advanced technologies and are optimised by machine-learning algorithms.

• Market CopyFunds: Focusing on a certain market segment or a specific strategy, these investment strategies offer thematic investment with none of the fees traditional funds entail.

• Partner CopyFunds: eToro’s strategic partners include some of the most innovative financial institutions in the world. Partner investment strategies enable these institutions to create CopyFunds investment strategies of their own, which are available for investment through the eToro platform.

eToro also recently launched the OutSmartNSDQ which is the first smart-beta Market Copyfund investment strategy that uses machine learning and wisdom of the crowd to outperform the Nasdaq 100 Index. Since Jan 2018, it has outperformed the index threefold.

*CopyFunds is an eToro product offering  diversified investment strategies.

After raising VC funds by Ping An in November 2015, eToro signed a strategic partnership with Lufax Holding in December 2016 and partnered with investing information website iMaibo. Such achievements are closely related to distinctive advantages of eToro compared to its competitors. As a well-known social trading platform, how does eToro establish such advantages?

In March, 2018, we announced a new round of investment worth $100M led by China Minsheng Financial, joined by KIP and SBI Group. Adding several new partners in Asia strengthen eToro’s ability to serve our clients in the region. Many investors are interested in our rapid growth in both the stock and crypto markets.

We are very ambitious with our vision and will be looking to use these funds to further strengthen our social trading platform, as well as expand to new markets specifically in the East.

There are two main advantages for partnering with eToro. The first is the large amount of asset classes we offer on the platform. Partnering with eToro enable our partners’ clients to trade different products, both from local markets and overseas. The second advantage is the millions of registered users from over 140 countries. Gaining access to these users, our partners will be able to introduce their offerings to an impressive amount of potential users. We are expecting to create many more partnerships in in Asia in 2018 and coming years.