Two major investors from Russia and Belarus have just invested $25 million in Capital.com, a trading app that is similar to Robinhood in the US or Trading212 in Europe — but with a specific AI-powered function that provides users with tailored content based on behavioral analysis.
This is the fourth deal under a $100 million investment program targeting AI startups, which was announced in early 2017 by Larnabel VC and VP Capital. The first investments went to Astro Digital, a California-based startup which develops open APIs for satellite imagery, Banuba, a startup with Belarusian roots developing an AR-enabled mobile software development kit, and Dronefence, a Germany-based developer of drone tracking and security systems.
Dubbed Smart Feed and scheduled to launch next month, this AI function analyzes user activity in real time to provide personalized news feeds, analysis, educational, and research materials.
“It is like a Facebook thread in the app,” said Capital.com investor and founder of VP Capital Viktor Prokopenya in an exchange with East-West Digital News.
Artificial intelligence against overconfidence
According to Prokopenya, Smart Feed is able to “identify common trading biases and behavioral patterns to provide relevant educational content whenever these biases are detected, [allowing] users [to] avoid the ‘mental traps’ that humans tend to have while trading, and [therefore] make more rational investment decisions.”
“Say you purchased an Apple stock, it grew a bit, then you sold it,” Prokopenya said. “You did the same three times. You start feeling that you know everything. You put all your money in Snapchat stocks — which unfortunately drop in price and make you lose everything. This is the overconfidence bias, which the Smart Feed technology can detect and address.”
According to Prokopenya, “the human brain is not made for trading because it is exposed to many behavioral biases.” The inventors of the app aimed to correct this by taking into account research from behavioral economists and scientists.
“Artificial intelligence can bring value wherever large volumes of well-structured data are available,” Prokopenya said. “Finance does have such data, in contrast with many other sectors where the benefits of AI are overhyped. We believe that the best investment banking products of the future will be based on a deep understanding of people’s mind using big data analysis and AI.”
The Capital.com trading app is intended for all types of investors, from the sophisticated ones to beginners who are not sure how to navigate the market. There are no transaction fees, but Capital.com does charge leverage fees.
Plans for expansion
The app was launched in July — but without the AI feature. It is available in the App Store and Google Play platforms in the European Union, according to the Cyprus-based company. Capital.com currently operates only under EU jurisdiction but has plans to quickly expand to other countries, including the United States.