Intesa Sanpaolo customers now have access to AI-enabled online trading

Earlier today, Intesa Sanpaolo [MILAN:ISP], one of the soundest and most profitable banks in Europe with a nearly €45 billion market capitalization, issued a joint press release with AnalytixInsight [OTC:ATIXF, TSXV:ALY], and MarketWall, introducing MarketWall’s recently-licensed online digital trading platform, InvestoPro. The announcement was made by Intesa Sanpaolo and AnalytixInsight. Recall, MarketWall is a Fintech provider co-owned by AnalytixInsight (49% ownership) and Intesa Sanpaolo (33% ownership). MarketWall developed InvestoPro as its 100%-owned digital discount brokerage subsidiary.

According to the press release, Intesa Sanpaolo customers will have the opportunity to access InvestoPro with their Intesa Sanpaolo credentials. We expect InvestoPro to be the preferred online broker solution within Intesa Sanpaolo’s mobile banking app constellation, which is comprised of 6.5 million users today. The InvestoPro sign up page, offers preferred pricing to all customers that have a bank account at Intesa Sanpaolo, signalling the strong marketing tie-in between the InvestoPro platform and Intesa Sanpaolo.

As a result of this launch, Intesa Sanpaolo’s marketing, and MarketWall’s relationship with Samsung, we expect InvestoPro awareness to increase significantly, which over time, should help to grow the platform’s subscribers. To date, InvestoPro.com has organically garnered a community of over 2.5 million global visitors per month through various channels, including its website, social network, smart TV, mobile app, and progressive web app. InvestoPro, which recently received regulatory approval from CONSOB (Commissione Nazionale per le Società e la Borsa), the Italian financial markets regulator, is an online and digital trading platform that includes financial analysis, news, research, educational content and other exclusive content created by teams of experts with the aid of artificial intelligence solutions provided by AnalytixInsight.

Two key reasons supporting the high relevance of today’s news for AnalytixInsight. Firstly, in our view, the InvestoPro trading platform will be considered an extension of the bank’s online offerings both by Intesa Sanpaolo’s customers and the bank itself. We expect that regular updates by AnalytixInsight over time could support this view as the data pertaining to InvestoPro’s subscriber growth becomes clearer over the next 12 to 18 months. In this regard, today’s announcement by Intesa Sanpaolo introducing InvestoPro to their customers represents a milestone event for AnalytixInsight, as such a move by a large bank demonstrates executive level support for the initiative within the bank, which should aid in the overall success of the InvestoPro platform. Secondly, given the platform’s core tenet of executing trades for retail investors while providing independent AI-driven research and investment quality analysis to guide the investment process, it checks the boxes of relevant compliance and regulatory considerations. As a result, InvestoPro could grow in scope within Intesa Sanpaolo’s offering suite. Doing so could enable the bank to add more FinTech features to the platform such as electronic payment services or crypto trading. These would generate greater revenue for Intesa Sanpaolo, MarketWall, and AnalytixInsight through its 49% ownership stake.

In Sophic Capital’s AnalytixInsight AI/ML Financial Services Platform report published November 9, 2020, we detailed the increasing importance of machine produced financial research and artificial intelligence in the investment industry. Our report profiled how AnalytixInsight created CapitalCube to serve this need. CapitalCube covers over 50,000 global equities, and its artificial intelligence (“AI”) based reports and subscription modules are integrated into the offering, making InvestoPro one of the world’s only AI-enabled online trading platforms. These tools help investors educate themselves with the operating of financial markets and receive guidance within a very wide range of investment topics. Most importantly, however, these tools match investors to investment opportunities that best fit their objectives and risk profiles.

Estimating AnalytixInsight Stock Price from MarketWall’s InvestoPro

Sophic Capital’s AnalytixInsight’s MarketWall Interest Should Reward Investors report published on April 5, 2021 detailed a range of valuation upside that MarketWall could provide for AnalytixInsight’s stock:

  • Anticipation of MarketWall’s business-to-consumer (“B2C”) user growth at Intesa Sanpaolo alone could significantly benefit AnalytixInsight’s stock price from its current ~C$1.00 per share;
  • Recall, AnalytixInsight stock closed up about 17% on March 29th, 2021 when the Company announced that its Fintech affiliate MarketWall had received regulatory approval from CONSOB, the Italian financial markets regulator, for its European online financial broker InvestoPro;
  • As MarketWall adds users and grows revenue, we illustrated that every 100,000 users could represent C$0.30 to C$1.20/share of value to AnalytixInsight, rising through the range as the Company attains business milestones;
  • We conservatively estimated that every 100,000 users on the platform could provide around C$0.30/share (or around 30% upside) of value for AnalytixInsight, based on Fintech peer companies (some of which do not generate revenue from customers and spend significantly to acquire users);
  • As a more relevant exercise, since MarketWall plans to generate revenue from users, we believe AnalytixInsight stock may be valued by investors through a different lens based on revenue. With this methodology, over four to five years, future value of roughly C$6.00/share could be realized by AnalytixInsight, which would discount back to around C$2.50/share of value today based on certain assumptions;
  • While amassing users and generating revenue could take time, AnalytixInsight has multiple options to unlock shareholder value from MarketWall via the unit’s relationship with Intesa Sanpaolo and other partners.

InvestoPro Deep Dive: An AI-Enabled European Online Broker

The rise of the investor generation. Interest in online brokers exploded in 2020 as a new generation of investors got their start in investing and have become a driving force reshaping the capital markets. A recent Schwab study estimates this new group to now be 15% of US investors, reducing the median investor age from 48 to 35. They have flocked to the online brokers and 94% of them want information tools to do their own research. Schwab now has 31.5 million active accounts and added a staggering 1 million in February alone. Schwab estimates (p36. here) trading on mobile devices is up 4x year-over-year and now accounts for 35% of trading. Robinhood users have doubled in a year to 20 million. In Canada, more than 2.3 million accounts were opened in 2020, a 3x increase from 2019

An online broker for banks. InvestoPro has been developed as a world-first AI-enabled online broker through its interconnection with AnalytixInsight’s CapitalCube platform, which incorporates artificial intelligence and scalable machine-created content to assist an investor in making trading decisions. For example, users are presented with a simple 5-star visual which measures several quality metrics of the stock they are about to trade. Likewise, the risk profile of a stock is measured to determine compatibility with a client’s risk profile. CapitalCube’s financial research analysis on 50,000 companies is available as an additional subscription option. Customized editorial content and learning academy modules also add to the richness of InvestoPro’s user information content, providing an online broker experience that is unparalleled in the industry.

With regulatory approvals in hand, the path has now been cleared for InvestoPro to become the online broker for world-leading bank Intesa Sanpaolo in the same way that iTrade is the online broker for Scotiabank.

Understanding “free” online brokers. InvestoPro will be a low-fee (not free) online broker. Many new US investors have gravitated to “free” stock trading platforms, and revenues at those brokers have spiked accordingly. Wait – how do you make money from “free”? It is called payment-for-order-flow (“PFOF”), which means the broker gets paid to route the order to a market maker for trade execution. For example, Robinhood receives 17c per 100 shares and 58c per 100 options traded. Those pennies add up and in 2020, PFOF revenues at the four major online brokers nearly tripled to $2.5 billion. PFOF as a concept has been around for decades and has been a lightning rod for regulatory concerns due to its potential conflict of interests, triggering FINRA fines and SEC charges.  The GameStop trading frenzy in January has reignited the debate around PFOF and gamification of the stock market, prompting a Congressional hearing and investors calling for an outright PFOF ban. Some countries like Canada and the UK have already prohibited PFOF, and as Scotiabank points out: “if you didn’t pay for the execution, you are the product”. In Europe, the regulators are choosing how, or if, free trading will evolve. The chair of the European Securities and Markets Authority (ESMA) takes the position that “there’s no such thing as a free lunch” and on Feb 23rd issued a statement outlining the need to analyse zero-commission stock trading apps and PFOF. The Italian financial regulator (CONSOB) also issued a statement on April 13th joining the debate in parallel with ESMA.

Value of regulatory approval. InvestoPro received regulatory approval from CONSOB on March 27th. Receiving regulatory approval for an online broker during this period carries a greater level of significance than what might be apparent. CONSOB is also actively shutting down any unregulated online financial activity and has blacked out 426 websites since July 2019. InvestoPro will be a European low-cost (not free) online stock trading platform that is rich in information and educational content, designed to meet the needs of world-leading banks.

The Journey to Build a European Online Broker

The path that led to InvestoPro began in late 2015 when Intesa Sanpaolo partnered with AnalytixInsight’s FinTech subsidiary MarketWall, to create innovative trading solutions that would interface with the bank’s Market Hub institutional trading platform. It was one of the early initiatives in that bank’s digital transformation journey. Intesa Sanpaolo is one of the top banking groups in Europe with 14.7 million customers and is the leader in Italy in all business areas (retail, corporate and wealth management).  The first product developed by MarketWall under the partnership was Investo, an app that would allow the bank’s customers to trade and monitor their investments. Investo was launched by the bank in 2018 and fully integrated into the bank’s banking app constellation, demonstrating MarketWall’s proven ability to successfully build and deploy a stock trading app at the bank-scale level.  By Nov 2018, the bank had nearly 3 million banking app users processing 53 million transactions year-to-date. That rapid momentum of app adoption led Intesa Sanpaolo to announce a new strategic plan to invest 2.8 billion euro in a digital transformation to establish itself as Italy’s first digital bank and increase its digitized business to 70%. It was a prescient strategy that enabled the bank to thrive during the Covid pandemic. 95% of staff employees are enabled to work from home, digital payments have doubled to 20m, app users are now 6.5 million and the institutional trading platform Market Hub processes 74,000 trading orders/day. Intesa Sanpaolo was recognized as the bank of the year in western Europe for 2020.

In July 2019, MarketWall embarked on a strategic plan to establish an online low-fee broker for the bank, which was subsequently named InvestoPro in alignment with the bank’s trading app Investo. InvestoPro is a wholly-owned subsidiary of MarketWall, and the InvestoPro board of directors is established as: 3 by Intesa Sanpaolo, 2 by MarketWall and 2 by AnalytixInsight. InvestoPro trade execution will be through the bank’s institutional trading platform Market Hub.

While awaiting regulatory approvals, InvestoPro has built meaningful brand awareness and now draws an audience of 2.5 million monthly users on its social media channels and
website, which is rich with free editorial content, news, quotes and more. Apps that were preloaded on Samsung devices have been updated to reflect the InvestoPro brand. The Investo stock app within the banking app constellation which is used by 6.5 million users also contributes significant brand awareness to InvestoPro. 

InvestoPro will expand into other European countries under the EU financial regulatory passport. Intesa Sanpaolo is an Italian bank with an international presence, operating in 12 countries and a corporate network in 25 countries around the world. InvestoPro is also empowered to operate as an online broker beyond Intesa Sanpaolo’s banking customers and is expected to win new customers in the same way iTrade wins business beyond Scotiabank’s banking customers.

White Label Ready for Other Banks and Brokers

The InvestoPro solution has also been designed to allow white labelling with other banks and brokers in a recently launched initiative marketed as GEMINA. GEMINA allows MarketWall to approach banks and brokers globally to license the online broker solution for deployment under their brand. GEMINA will interconnect to that bank or broker’s existing trading platform. For example, a traditional full-service broker in Canada that does not have a retail online discount offering can simply license GEMINA for deployment under its existing brand, thus avoiding the time and costs for it to develop its own offering. With retail traders now flocking to online trading platforms, traditional brokers are now forced to offer online trading to avoid losses of clients or assets. GEMINA is the solution and is fully customizable by the broker.

InvestoPro, now with regulatory approvals in hand and an awareness launch by Intesa Sanpaolo, is well-positioned to dominate as a European online broker with a world-leading bank and artificial intelligence company as its partners.

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