By Edward Poultney
Edward Poultney logs on with E*Trade’s regional GM to find out what the future holds for tomorrow’s online investors.
The one thing that's going to change everything is broadband penetration," says Mikaal Abdulla excitedly. "In the US it's approaching 70 percent, in developing markets it tends to be around 10 percent, so it's inevitable that there is going to be huge growth here."
E*Trade's Group Vice President and Middle East General Manager is well placed to see the potential in the expansion of internet saturation, it is the strategy that the company has been working towards pretty much since its inception in its current form in the early 1990s.
Originally a business-to-business technology provider for other offline brokerages that were in the process of offering an online solution to their customers, E*Trade evolved with the market. The company created its online trading platform using its own technology and began trading as a direct consumer brokerage, going public on the NASDAQ in 1996. As US volumes began skyrocketing between 1996 and 2000, E*Trade was perfectly placed, at just the right time. "It was almost like a perfect storm; on the one hand large volumes of people started going online and, on the other, there was huge interest in stock markets and trading because the economy was doing so well," enthuses Abdulla.
The likeable, softly-spoken Abdulla may seem young to have reached the position he has, but his enthusiasm for his work is really quite contagious, and it is not just being at the cusp of developing technology - he is sure that he represents the future for private investors. "We have two sets of competitors," Abdulla explains, "those that are online like us and the traditional bricks and mortar."
E*Trade's foray onto the international market and its diversification into further online services set it ahead of its peers. "We have a global business, we went into Asia, Europe and the Middle East when our competitors did not. We also have a fully-integrated online mortgage, bank and lending service on a single platform, this is where we see business growing in the future," he says.
The other principal strategy setting the group apart from high street banks, and the big investment houses that Abdulla describes as ‘bulge-bracket' competition, is that the business model is geared around private investors. "We have a lot of success with the ‘mass affluent' market," says Abdulla. "Individuals who hold between US$50,000 and US$500,000. It's a large piece of the market but it goes largely unserved because the large brokerages for the most part usually set a floor of US$1m."
It is not only that what could be termed as the prosperous middle classes are being targeted for the first time, the consumer profile is also changing in tandem with the wider availability of technology, breaking out from traditional mindsets. "People are becoming significantly more self-directed," confirms Abdulla. "Those who previously went into a bank looking for advice, it's starting to appeal to them more as they work from home and become more comfortable online."
The major facet of doing business that has been revolutionised with the advent of the internet is the speed at which information can be transmitted from one part of the world to another (the marketing campaign surrounding the launch of the Middle East office played on this fact, with banner advertisements in the major press heralding the slogan ‘UAE to Wall Street in two seconds'). Abdulla believes that it is this aspect more than any other that has encouraged consumers to branch out on their own, eliminating the need for the traditional broker as middleman. "We offer an execution of two seconds or less on a trade; you have access to all the same information that your broker has on a real-time basis," he explains. "Also, cost-wise because of the low overheads the flat fee is around US$10, so compare that to picking up the phone to contact the broker, waiting for them to pass on the information at a cost and then the fee could be in the hundreds of dollars."
In his role as Vice President in charge of the group's international strategy, Abdulla has spent most of the last few years visiting emerging markets and gauging their readiness to embrace E*Trade's business model. The experience has given him an appreciation of a huge breadth of cultures, countries and their working methods, which has passed into his management technique. "My team finds my style a little unique," he confides. "Buy-in is extremely important to me, they have insights that I'll never have so they have to be at the forefront of decision making." These cultural insights have made such a deep impression that they have not only helped Abdulla map his vision for the future, but have also caused him one regret with his journey thus far. "I would have loved to go to university abroad," he says. "An education outside of the US would have put me 10 steps ahead of where I am today culturally."
"For me, I think you're educated in the real world, but I've got to balance - I've got a lot of siblings and I can't tell them not to take school seriously!" Abdulla laughs, before adding: "But it is a balance and things happen in the real world and with failure, failures are what make you step up and learn. But now I plan to be in emerging markets for the rest of my career."
Abdulla is certain that he will not have to wait until the end of that career to witness seismic changes in everyday technology. "I was in India recently, and it's on the cusp so we were thinking that we might bypass the pc and focus straight on handheld devices. Obviously you can do everything on the pc but in the next few years the majority of transactions will take place on handhelds. Something big is going to happen and it's going to change the way we do everything, it really excites me!" he says.
"I'm really excited for when internet and TV converge completely; you'll be watching the news and you'll have a streaming ticker that you can open and access your account, double click and you're pulling up information from Google, double click again and you're trading - it's almost there," he adds.
If his prescience for the success of the multi-platform strategy comes true, watch this space for the completely interactive world, coming soon to a home near you.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.