What’s stopping Barclays/Hargreaves /DeGiro/Challenger bank or another unicorn fintech from copying your business model here (UK) and in the rest of EMEA. They have resources to scale quickly etc. First to market definitely helps but curious to get your thoughts
Welcome to the forum
DeGiro have already tried, they were going to launch a free trading app called DeZiro which was to be supported by ads but looks like it has given up.
Mate, you should see some of the systems we are on… We are still on Windows 7!
I think people overestimate how quickly big banks or brokers can move with legacy systems and increasingly tighter budgets. Also, they love cash cows. They hate and dread the idea of potentially cannibalising their own businesses.
Yup - those are some old articles indeed!
Colbalt systems vs todays cutting edge - make sense!
HL/Barclays/Other big firms will have overhead constraints - plenty of inefficient staff to maintain, as well as plenty of non-current assets such as buildings which do not have a great ROI. Freetrade does not have that issue.
Other fintech banks, i.e. Monzo or Revolut, would simply have no time for that - they can barely implement banking features with a pace and would be concentrated on their sector for a while (few years).
This will give a big headstart to Freetrade in its development. So it leaves us to other startups in a Brokerage sector - cannot see any of them anywhere yet. Building the systems will take months/years so again, headstart to Freetrade.
Do not have concerns for them, just watch the community and the demand growing.
great way to put it!
I think your question has already been answered really well and it’s amazing that so many points of view have been covered so quickly (on a Friday night!).
In my opinion, and probably only echoing the above:
- Large and clunky incumbents cannot be relied upon to do anything other than what they’ve been doing for decades. That’s true of any industry (Blockbuster versus Netflix) and is playing out in the retail banking sector before our eyes.
- If a competitor did put out a genuinely competitive offering to us (not only ultra-low fees, but as well an engaging customer experience that actually makes investing easy), it would validate our business model to the extent that someone would go to the extreme of copying it. This would create a level playing field for us to prove that the technology can do the hard work and the cost of running the business need not grow linearly as the customer base does.
- With regards to challenger banks and unicorn fintechs (who in my mind are a more natural long term competitor than the incumbents), I think they have many more easier wins on their roadmaps than stockbroking (and indeed the theme at the moment is simply to plug into established investment firms and robo-advisors). You may have gathered from our blogposts that, while the Freetrade experience is extremely simple and beautiful, the stuff under the hood is a magnitude more complex and we are operating in a world where the various other parties that make up ‘a trade’ still have very archaic systems. It’s a deep specialism and investment in people and time to tackle both at the same time. And if they did try, see point 2
On the subject of big companies trying to innovate, I really recommend this tweet thread.
Enjoy the weekend everyone!
Great post @freetrade_cal
I agree that the most likely competitors will emerge from your last points on fintech or unicorn companies (Revolut, cough cough). I think it’s been quite clear that Monzo will not likely develop their own in-house stock broker (as Tom Bloomfield is one of the guys on the Freetrade waitlist and has also explicitly said on Twitter that he can’t wait to try it out), and prefers the marketplace approach. However, it’s seems like Revolut Wealth will attempt to do so or at least bring in some robo-advisor tool to manage discretionary portfolios. Any thoughts on this @freetrade_team?
Perhaps Freetrade decides to partner up with Revolut to help deliver a stock broking solution?
Personally I see share trading as an activity that deserves just as much focused attention & functionality as banking. So I find it hard to imagine another company that isn’t focused solely on this providing a service that’s as good as a company’s that is.
I’m sure their pricing will be competitive, although their costs may be higher, as I expect they’ll provide their service via a third party. But either way, I don’t believe that the pricing is all that matters.
I expect Revolut will offer some of the same service but not all of it e.g. access to a more limited range of ETFs & stocks. As a result, I can see them making some money from their service but ( risky prediction ) I can’t see them capturing significant market share. They may even bundle it into their Premium (think Amazon Prime) subscription service, which would limit user’s access to it.
I guess we’ll have to wait & see what their solution looks like
Questions about app & Crowdraise
We’re anti-intermediation at Freetrade. Intermediaries, or middle-men, just drive up the price for the end customers. The fintech ‘marketplaces’, aggregators and the like are simply intermediaries that need to get paid (or disappear).
We’d love to partner with a company like Monzo, to offer a Freetrade pot, for example. But we wouldn’t pay for it.
There’s already an app store for financial services. It’s called the App Store. Your phone is the platform. It’s a swipe to move apps and see your investments in Freetrade. No need to try and cram everything into one app ( Revolut).
Great post @adam. I agree with all your points.
I think behaviourally, as consumers, we actually do not want a one-stop-shop and are very happy utilising different providers or apps for different solutions. I, for example, multi-bank, have different credit cards from different providers, and my current stock broker isn’t one of the banks I bank with.
It isn’t a winner takes all market. As long as Freetrade has a competitive fee schedule and market leading platform, it can capture meaningful market share.
Exactly this! Don’t be the jack of all trades, master of none… Get your primary offering as good as you can make it and work to offer integrations and connections with businesses that are doing similar in their own space.
Research and investment tips
Hi. Someone asked in the Discussion about eToro as one of the competitors. Any comment on this?
@dinrivas best resource is this in terms of explaining why eToro’s business (and every other CFD / spread betting firm) is very different to us: https://freetrade.io/blog/cfds-are-not-stocks-cfd-trading-is-not-stock-trading/
If you have further questions, just shout!
Thanks for that information.
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