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December 23, 2014

How Digital Visualization Tools Will Move Markets

Posted by Rajashekara V. Maiya (View Profile | View All Posts) at 8:33 AM

StockCity: A virtual look at your stock portfolio | CNBC [Source: https://www.youtube.com/watch?v=BRKtDd23JUE]

When you think of high-tech, innovative research and development facilities, industries like defense and aerospace, pharmaceuticals, and telecommunications probably come to mind. But mutual funds? Yes, there is such a thing as a mutual fund R&D laboratory.

In fact, one such lab is associated with Fidelity Investments, the largest mutual fund firm on the planet. What amazes me about pushing the envelope in the mutual fund industry is that at first glance there doesn't seem to be an envelope to push. An investor allocates a certain amount of money toward buying into a fund, and each month she gets her statement. OK, so maybe the statements come online instead of in the mail. But is there any serious need to tweak this age-old system? It works well enough.

According to an innovative company like Fidelity, the answer is yes, there is a need to update things. Its Fidelity Labs is taking a cue from other consumer-focused industries and developing really neat technology to get the average person more engaged with the art (or is it a science?) of mutual fund investing. StockCity, Fidelity's take on the popular SimCity game, is becoming a hit with select consumers in its trial stage. For a good portion of the population, the capital markets can be a confusing, complex place. What StockCity does is to help consumers visualize their investments as if their portfolios were cities.

Gamification, the concept which powers StockCity, is making its presence felt in the financial services industry. Financial services companies are using gamification to help customers understand financial products in a language that they understand better. Specifically the younger generation. Our recent survey with EFMA reported that banks such as BBVA have invested in pureplay gamification technology companies in the Silicon Valley to enhance customer experience.

One of the great promises of digitally powered platforms and marketing is visualization. The 'dashboard' is perhaps the best known and most used of digital tools that utilize the power of sight. But augmented reality is taking visualization another step forward. With the Fidelity financial planning tool, which is now in a two-dimensional format during the test phase, the goal is to release it with three-dimensional capabilities as well. In fact, it will operate on an Oculus Rift augmented reality helmet.

The private investor would put on the helmet (or look at his computer screen) and see a city skyline. Each neighborhood stands for a sector (retail, pharma, oil, aerospace, consumer durables, etc.) and each building within each neighborhood represents a specific stock. The height of every building rises and falls with its stock price. If an investor has a portfolio that includes, say, a Fidelity mutual fund that focuses on pharmaceutical companies, the buildings in the neighborhood would generally be one color (for pharma) and the individual skyscrapers would move up and down depending on the market prices of those pharma stocks. Another neat feature is that the investor gets to visualize the health of the greater economy by how sunny or cloudy is the weather over the StockCity. A clear day suggests a bull market; a cloudy or rainy day suggests a bear market.

Speaking of bull markets, investors and analysts alike wondered why a hot social media stock like Facebook would pay a whopping $2 billion for Oculus Rift, the virtual reality company that Fidelity hopes to partner with for StockCity. When you consider how digital visualization tools work for the consumer, it's no wonder why social media sees great potential in these sophisticated augmented reality headsets. They're going to be used for more than just really cool video games. Soon, investors will be moving the capital markets according to trades they make from their digital investing helmets and platforms.

Let me leave you with this thought, though. Fidelity is the largest mutual fund organization and its foray into gamification for customer engagement is no doubt interesting. But, think about this - the third largest mutual fund organization is Alipay - a mobile-only mutual fund company that is part of the Alibaba group of China. Alibaba recently went public with the largest IPO in corporate history. Alipay manages its entire mutual fund operations on mobile. Neither Alipay nor Alibaba is a financial institution. This means that the competition for banks is indeed heating up with new players finding new ways of doing business. What the future holds is anyone's guess!

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