Risevest Eyes Crucial Year For Wealthtech Amid Economic Dire Straits
In recent years, there has been a significant increase in the adoption of wealthtech apps across the globe, as more people seek to invest their money in a way that is convenient, affordable, and secure. This rise in the popularity of wealthtech apps can be attributed to several factors, including the growing demand for digital financial services, the need for greater access to global financial markets, and the desire for a more user-friendly and personalized investing experience.
It could be argued that the unsavoury realities sweeping through global economies of late – characterised by galloping inflation and fears of a recession – have made an even bigger case for wealthtech products, and perhaps more so in African markets troubled by economic instability, inflation, and currency devaluation.
Nigeria and South Africa, Africa’s largest economies, witnessed record levels of inflation in 2022, and this poses a threat to the continent’s rising but often-embattled middle class.
Thus, locals are increasingly taking to apps provided by startups such as Risevest; a Nigerian wealthtech enabling locals – who typically wouldn’t have access to foreign stock markets – to invest in local and global dollar assets, holding their investments in a more stable currency to protect them from turbulent local markets. Other wealthtech startup investment apps such as Piggyvest, Cowrywise, Bamboo, Chaka, and Trove are also seeing significant adoption.
Although Risevest underwent a bit of a managerial shakeup last year in the aftermath of a controversy that saw its founding CEO step down, Tony Odiba who now holds the reins at the startup tells WT in an exclusive interview that the coast is clear and why this year is a crucial one in terms of retail investments democratised by apps.
Now, here are some of the more interesting excerpts from the interview.
How does Risevest help ordinary people in Africa access foreign stock markets to invest in local and global dollar assets?
Tony: Risevest is a fintech platform that makes it easy for Nigerians to access dollar-denominated investment options by removing the traditional barriers to entry such as high minimum investment requirements, lack of access to foreign currency, and lack of understanding of the investment process. This gives people the opportunity to diversify their portfolios, invest in assets with high returns, and potentially increase their wealth. We’re not limited to stocks. We also invest in real estate and fixed income both in foreign markets and locally.
Can you discuss the current state of the African economy and how it may be affected by the potential global recession?
Tony: The African economy has been growing in recent years, However, the current economic situation, which started with the pandemic, is having a significant impact on the African economy. The biggest issue is skyrocketing inflation, which is affecting the day-to-day lives of people across the continent, and making it harder for everyday people to afford necessities. The global increase in the cost of capital and geopolitical uncertainties are reducing investments across the board and with a recession coming, there might be a slowdown in some African economies. However, tech companies are still attracting investments, internet penetration is leading to more remote work, commodities exporters especially oil producers are reaping some benefits of stronger energy demand and higher African immigration means there will be higher remittances over time so there are bright spots to be optimistic about.
How does tracking middle-class spending and investment patterns in Africa provide insight into the continent’s economic recovery?
Tony: The middle class is considered to be a crucial driving force in any economy. The middle class typically has a stable income and is more likely to make investments in housing, education, and consumer goods, which drives demand and stimulates economic activity.
Understanding middle-class spending and investment patterns will tell you which sectors are likely to win in the short and long term. Also, the savings rate and direction of middle-class investment is a good indicator of how much opportunities you can expect in an economy because a lot of the time even foreign investment tends to follow the tastes and preferences of the middle-class population.
Can you discuss any successes or challenges that Risevest has faced in its mission to promote financial inclusion and investment in Africa?
Tony: In terms of success we have helped more than 250,000 users in our primary market in Nigeria who are investing better and growing their money consistently. We are starting to think of expansion, and exploring new markets to grow into. A lot of our users are either first-time investors or are building consistent investment habits for the first time, which makes it even more rewarding to us.
Last year our US parent company became a federally registered investment adviser with the Securities and Exchange Commission there giving us additional capabilities at a higher level to offer more and increase our trust in our markets.
A third big area of success for us is in promoting financial literacy through our educational initiatives. Our investment club has helped more than 15,000 people, many of whom have been with us from the beginning and have gone from complete beginners to being very knowledgeable about investing.
The challenges we’ve faced include the still low levels of financial literacy in the broader population, the fact that we operate in a low-trust environment, and regulatory inconsistency across the continent. We’ve also had to figure out how to build a high-performance culture while maintaining a safe environment for our team.
How do you see Risevest and the African economy evolving in the next 5 to 10 years, and what steps is the company taking to stay ahead of potential challenges?
Tony: It’s hard to predict the future but we can extrapolate current trends. For the company we expect to continue to expand our offerings as well as the markets we operate in, and the users we cater to. We also see population growth, increased global connectivity and internet penetration in Africa leading to higher incomes and higher investment appetite among Africa’s middle class.
We believe remote is here to stay which means more of our young people will earn from wherever they are in the world and therefore would want to invest across the world in wherever they can get the best returns, home or abroad. And our goal is to give all those new users the best investment experience they can find anywhere.
So one way we prepare for the future is to ensure our compliance and operational infrastructure is world-class and can support global cross-border operations because Africans are going to increasingly operate across borders. We are constantly researching better ways to leverage technology to reach and stay connected to our users wherever they are. Ultimately, we aim to be the best vehicle to manage your money globally while adapting to the needs of young, very mobile and savvy Africans.
Can you speak on any notable trends or developments that are currently occurring in the African Stock Market?
Tony: Growth of the Technology sector: The technology sector is experiencing rapid growth in Africa, with many new tech startups emerging. This has led to increased demand for tech companies to list in African stock exchanges and the exchanges themselves are leading the effort to attract these companies.
Increased Liquidity: The African stock market is becoming more liquid as more companies go public and more institutional and retail investors enter the market.
Increase in cross-border investment: As we already highlighted there is a trend towards cross-border investment. More international investors are looking to diversify their portfolios and are seeking investment opportunities in Africa and with AfCFTA other Africans are also interested in investing in exchanges in other African countries, not just theirs. This leads us to the next point:
Rise of regional stock exchanges: Regional stock exchanges are becoming more prominent in Africa as countries seek to integrate their economies and create regional economic hubs. This is leading to increased cooperation between multiple countries’ stock exchanges and in some cases, like East Africa, even integrated stock exchanges.
How Risevest’s platform helps in diversifying investment opportunities for people and how it helps in risk management?
Tony: We’ve simplified and popularised the ability to hold multiple asset classes like stocks, real estate and fixed income in one plan. It’s more diversified and more resilient to spread your money across different assets because they behave differently in different market scenarios. It also lowers your overall risk.
Asides from this, our platform asks you some questions to understand your risk appetite and your risk tolerance and the investment options are tailored to your risk. So for many users, it’s the first time they’re understanding that it’s not always about chasing the highest returns, but about understanding what you’re investing in, your personal time horizon and how your investment fits into that broader goal.
Our philosophy is that it’s more important to earn a consistent long-term return in a safe way than to earn a lot of returns by taking undue risk. Our platform is designed to reflect that, and many of our users have seen that this is a much better way to invest over time.