How does Freetrade make money?

How does free trade make money ?

Are you asking how they make money as a business, or something to do with how they make money fund raising?

As a business?

From the web site

Making money in a fair, transparent way

We have a simple, transparent freemium pricing model where you can pay for the premium features you want. This helps us to build a sustainable business model that aligns with the success of our customers.

We don’t charge commissions on trades, as most traditional stockbrokers do, removing financial barriers to investing.

We are committed to fair and transparent pricing. See all costs on our pricing page.

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Thanks that was useful

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Changed the thread title to a more relevant one, removing the mention of Crowdcube.

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Well I saw little on how Freetrade is becoming profitable.
In their deck (on Crwodcube), they expect 263k clients by the end of this year and revenues of £5.2M. They also expect 25k clients as “alpha” customers so £3Mk (assuming it’s £10/month).
That is only like 57% of their revenues so I am genuinely wondering what are the biggest drivers of revenues! Can it only be the 0.45% fee for FX for the remaining?!

Edit: my my maths was wrong indeed as I initially forgot to multiply the monthly fee by 12! Still is accounts for “only” 57% of their revenues

Interest on cash balances, ISA account fees…

Also you only assumed 1 month of Alpha account fees when taking it as a percentage of expected revenue

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Hopefully my maths is correct:
25k Alpha members would be £3M income a year (£120 each p/a)
The other £2.2M could be made from less than 62k ISA members (£36 each p/a).
I have no idea what the actual ISA take-up percentage is, but 62k people paying for an ISA from the remaining 238k non-alpha members seems feasible.

You might not have been following for a long time but invest allows those things, I don’t think bringing invest online ever was discussed as allowing those things on day one. From reading this forum the last two years it seemed to me that the invest platform would allow them to scale, allow them to add new features and crucially allow them to cut costs above all else.

Weve seen a marked increase in the amount of new stocks and ETFs being brought on to the platform so that’s working. Yes there’s more to improve and I for one would still love to see the bid offer spread and live pricing but at the end of the day freetrade will have to be able to change their mind quickly if a feature they thought was going to become live, made other parts of the business worse or more unprofitable.

I never expected for instance that they would stop charging fees for instant trades which they have done. And that was a revenue generator that was quoted in previous crowd funding rounds but there’s always going to be things that we just won’t have the full details to understand. It’s my own view but I trust them to do whatever is right to scale freetrade.

Everyone’s opinion is valid and always useful.

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I edited my post. I feel so silly as i forgot to multiply by 12! Thanks!

Yeah I was surprised they stopped charging for instant orders (I would have been ready to pay for that!).
I think they were right to keep charging the 0.45% FX fee to become profitable.
Yet I dont get how they expect a revenue of £20/customer in 2020 and £70 in 2023 (revenues from Alpha only accounts for 25% of the forecasted £242m-revenues)

I think I had a similar confusion when reading this years pitch deck. I thought it was optimistic but I learnt a while ago to add a year or two on to these sorts of projections. There’s a school of thought about aiming for a high target and even if you kiss it, you might have been stretched more than if you’d played it safe?

Also alpha hasn’t been released yet so no revenue from that. I would happily love over my Pensionbee sipp though if they can sort that out this year! Add in the revenue lol :joy:

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Yes high targets are gooood!
It is just I am curious to know how things add up if 75% of the revenues does not come from Alpha (by 2023), then… from where?

I think I’ve seen something about white labelling or business to business type revenue too.

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@Edouard Accumulated interest will make up a good proportion of that, especially if people hold back on buys over the coming months.

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I read stuff about market makers as a primary source of revenues for Robinhood. Do you think it is similar for Freetrade?

No you can’t sell order flow in the UK - it’s illegal I believe.

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By charging a monthly fee for the ISA account. I have the ISA account.