Revolut Free Trading Tweet? 🦅

This is your favourite line :joy: Glad you’re back ahem but as you know we don’t see eye to eye (previous in the Monzo community) so I’m not going to go off topic anymore than we have discussing this.

I’ve said my peace. I believe this community is great; I was just talking about being mindful of groupthink in the future as it grows. Anyhow this is something for you as forum leaders to figure out and I’m sure you’ll get the balance right :slightly_smiling_face:

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The answer to all your problems. Invest in all three. Monzo, Freetrade and Revolut. There will always be more than one player in the market, and as of today, in the disruption play, all three are on my watch list.

Just hanging out to get on to the Freetrade platform and start investing…

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https://www.ft.com/content/e066ca88-698a-11e8-8cf3-0c230fa67aec

This is official.

A quote to answer some questions in this topic:

…In the meantime, it plans to launch the share trading service in the next four to six months in partnership with an established brokerage, shouldering the cost of commissions it pays on behalf of its users…

Can we create a closed channel on the forum to discuss sensitive questions (like this one) for the investors’ eyes only? I have some thoughts on this but am hesitant to share since there is no privacy. What do you think?

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@szb We are big fans of transparency, so as a first step, maybe just DM me what you’d like to discuss.

Most probably it’s something we can publicly debate.

I’m actually excited for this to launch, and it’s a big testament that, after what comes across as a relative (compared to the space) lull in crypto, this seems to be considered as a growth engine.

Now, “partnership with an established brokerage” is not how we think about building a product that really solves a problem on a deep enough level. No need for more middlemen in my view.

Also, as you are an investor, please DM us your email you registered with on Crowdcube, so we can give you a badge.

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Partnership with an established broker?! And shouldering the cost of commissions?

That’s surely an unsustainable business model? Watch CAC go up once again…

I love Revolut, but Freetrade’s model is far more profitable and sustainable.

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That adds weight to my theory that this will be a Premium subscription only service (as they have to cover that cost), which would limit the number of users that use it.

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That would still be a lot of expensive services (including the FX and free insurance from a partner) rolled into a £6.99/month account. Not sure but think it would just marginally cut the cost to them, not cover it

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So Revolut’s just said that they plan to make their money via interest from client’s funds (presumably lending deposits once they have a banking license?) + extra incentives for Premium customers :thinking:

So perhaps a portion of the service will be available to all users but they’ll keep the best bits for Premium subscribers.

Robinhood claimed this is how they’d make money when they first launched. Historically, stockbrokers made a lot of money earning interest on client cash (“interest turn”). But with interest rates where they are, it’s simply not true anymore. Robinhood really makes money off their margin/leverage product (ie high-interest loans that magnify your investment gains or losses).
Also worth noting, you can’t lend client money in a brokerage account like a bank. There’s a reason bank regulation is much stricter with very different regulatory capital requirements (even if the stockbroker is part of a group that has a banking license).

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Revolut promises that you won’t pay any commission when you buy or sell shares. The company plans to make money on margin trading, securities lending and interest on cash.

Unless I’m missing something, both models are freemium models. Also, whereas Freetrade don’t plan on offering margin trading, Revolut will which is an additional revenue stream. Correct me if I’m wrong?

Somebody just posted this article in the Monzo community:

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We can only speculate to a certain extent until we see their full pricing schedule (who knows what the zero commission covers) but from our perspective the biggest difference between us and Revolut is that we are an actual broker ourselves.

By becoming a member of the LSE, CREST etc and trading directly with the market, we can slash the cost of executing a trade.

Revolut’s plan is to act as a front end for another broker, who will charge them fees on each trade. By introducing a middle man you lose the ability to cut the cost per trade, and therefore it is hard to see how they can offer zero commission in a sustainable way - whichever broker they use will need to make a return themselves!

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Interesting. The article mentions parallels with the Amazon Prime approach of a predictable revenue stream. In a similar vain to you where you want to make Alpha so good that it makes sense to pay for it, it appears that this is part of Revolut’s plan for their premium subscription. Would premium revenues cross-subsidise non-premium users not be sustainable from the info we currently know?

Possibly, but it’s hard to see at the current price how that can work when you consider everything else it includes.

But like I say, we’ll wait and see when their pricing model comes out.

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They might have a free quota, so x trades per/month and they’ll be batch traded to keep costs down.

On the flip side the usage might be concentrated to a few users and the rest not bothering or the rest picking the Revolut Wealth offering in which case they can do unlimited free trades.

In any event you might find people use Revolut and then realise they need more and move to Freetrade. So it doesn’t have to be a zero-sum game.

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If margin trading will be available to all, I think this would be profitable in of itself. This is me commenting off the top-of-my-head, so don’t quote me on this.

Would it be possible to have a blog post on margin trading and why Freetrade are choosing not to offer this? @Toby

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Ask and you shall receive - I’ve just managed to volunteer myself to write one…!

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Margin trading is famously profitable for firms but also famously easy for investors to lose money.

The decision not to go for margin was very considered.

As mentioned in this post, as well as our tech, one of our big innovations is that we’ve created a business model that puts our customers first.

We don’t want to be incentivised to push risky, get-rich-quick or other traditionally money-losing trading behaviours.

That’s basically why we won’t pursue margin trading - it seems far more relevant to a spread-betting/cfd audience anyway.

But we’re interested to write a more in-depth blog - good idea.

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And Rob will be the man to do it :wink:

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I would like to see Freetrade win this war with its speedy execution. Execution is everything! :slight_smile:

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@rebeccaty Super important, agreed!

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