New adventures in finance

Last week, I spoke to the CEO of Increditrade about their service. This is a new startup trying to provide Web2.0 capabilities in the Financial industry where rules and regulations are so tight that the independence and freedom of 2.0 is just a dream. There are some players in stock trading arena, such as Zecco who are doing quite OK. Increditrade takes one step forward in the integration of web2.0 in stock trading experience.

Most of us have almost Zero knowledge about how to invest in the Stock market. We read few articles, search few websites, maybe read some analyst reports and eventually invest based on our instincts. Sometime it works, sometime it does not. Increditrade is providing additional feature to the users to help them make sound investment judgements.

Business model of increditrade is dependent on the assumption that an investor who got X% return from the market in past 3-5 years is a good investor. And if customers are given an opportunity to look into his/her investment patterns, then they would be willing to look into it before making their own judgement about investing. Maybe, they will be willing to even pay for this "peek" into some smart investor's portfolio or decision making process. Simply put, as a customer, I have to pay some $$ to increditrade which in return will allow me to look into the portfolio of a trader who has consistently made significant profits in the past few years. In addition to that, I will have all 2.0 features like collaboration, chat, blogging etc.

Technically, increditrade will have seamless integation in the backend with major stock trading players like Etrade or Scottstrade. Also, smart investors will get some payment for sharing their portfolio with the public. Ofcourse, their names and account # will be withheld from public eye.

I like the idea. Its innovative, different, and definitely attractive. It is a differentiating factor for the company. There is a white-space in the market and increditrade is definitely playing with the psyche of the common man. Whether or not people would pay for the service is a diferent question which will be answered in near future.

Some things to consider:
1. How to attract critical mass of users who are willing to pay?
2. What is the payment model? Is it one time fee OR is it a subscription based model? My intution says that the company would go for subscription based model, but we'll see.
3. How do we stop fraud? What if one user makes the payment and decides to copy the content and put it on his/her blog?
4. How do we ensure the security of the account holder?
5. Even smart investors make bad decisions sometimes. How will a customer learn to differentiate good decisions from bad ones.
6. There might be confusion about the investment strategies of different "peekable" smart investors. How can this confusion be minimized so that the end consumer "feels" that the site is providing value rather than adding on to his/her confusion.

Overall, its an innovative idea, and I might be peeking into some smart investors' portfolio very soon.