The news: Feeling the squeeze from dwindling retail investor activity, digital brokers are branching out to keep customers engaged.

• UK-based investment app Lightyear launched a new social investing feature called “profiles” in the UK and the EU. Profiles let users share personalized web pages showing their portfolio holdings, watchlists, and recent trades.
• DriveWealth is expanding into crypto. The New Jersey-based API brokerage platform acquired Crypto-Systems so it can offer Bitcoin and Ethereum trading to partners and retail investors.

The bigger picture: Overall trading volume has slowed for digital brokers due to thinning investor savings and a crowded marketplace that already includes industry heavyweights eToro, Robinhood, and Vanguard. Market participation by retail traders fell to around 18% at the end of January, after reaching 24% in the first quarter of 2021.

• Incorporating social media elements into trading platforms is crucial to lifting engagement and trading volume without provoking the ire of regulators through gamification.
• Lightyear isn’t the only one adding social elements to its app: eToro and ZuluTrade both let users discuss and share trade ideas and copy the trades of influencers.
• Brokers are also betting on cryptos to reverse falling trading volumes among retail investors. Last week, Robinhood said it will roll out a crypto wallet in Q1 2022 that will let users directly hold and receive cryptos without having to convert them into fiat currency, potentially encouraging greater trading volume.
• DriveWealth said expanding into cryptos was driven by customer demand. Founder and CEO Bob Cortright noted that "no other asset class translates to notional investing the way cryptocurrencies do.”

The big takeaway: Digital brokers are increasingly looking for novel ways to boost revenues and differentiate their product offerings from rivals to sustain growth. Incorporating social elements and crypto trading are two paths digital brokers may take, but other strategic options may also be pursued.

• For example, eToro added a decentralized finance (DeFi) portfolio in September comprising 11 DeFi crypto entities, including Ether, Uniswap, and Chainlink.
• Other options include launching IPO investing offerings or long-term investments.
• Even so, it’s unclear whether these strategies will plug the revenue gap for firms left by the day-trading frenzy drying up.