Withdrawals taking 3-5 days

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#1

So adding money from my linked bank account to my Freetrade account happens almost ‘immediately’. Maybe 30mins max.

But, if I wanna ‘withdraw’ my money from Freetrade, they’re holding onto it for 3-5days before actually getting it back into my linked bank account! So essentially Freetrade either accrue as much interest as possible on thousands of people’s money OR they could even be investing people’s money for 3-5days, creating a kinda rolling cash-flow system.

I’d love to hear the community’s thoughts, and also Freetrade’s response/thoughts?

Don’t get me wrong, I love the app - but if ‘holding’ people’s money is part of their business model then I’d just prefer they were upfront about that.

Ash

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#2

Freetrade cannot invest our cash so that is not what is happening here but I agree that the withdrawals take too long. My understanding is that Freetrade use the BACS method of bank payments (same way 90% of the UK workforce receive their salary) but the problem is it is not same day. It could, and should, be hence why I have voted!

I cannot understand the logic behind the way funding and withdrawals work. If Freetrade could offer interest on cash holdings people would hold cash in Freetrade. Freetrade could then take 10% of that interest as commission and make more money than ever before. I would never hold any cash in Freetrade for any length of time because effectively it is a drag on your overall return.

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#3

As someone has already mentioned. They send the payment using BACS which is an old outdated system that takes ages.

If you want it quicker then you can contact them and do same day bank transfer for £5
Or if you have a monzo account you can get paid the next day because of their get paid early feature

#4

That doesn’t make sense, how could they make more money by paying interest, then taking 10% back?

#5

I believe he means that in that scenario more people would be willing to hold greater amounts of cash in their Freetrade accounts, instead of topping-up when about to invest only. In my understanding, the argument assumes accounts are fully invested and that if the suggestion would be implemented then benefits of scale would take place.

My comment doesn’t imply agreement nor disagreement with that suggestion.

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#6

Freetrade wouldn’t pay interest but rather do a deal with some bank or another. Funds deposited would be held securely but earn interest with the bank having to worry about lending etc. (obviously no ones funds would be at risk as the deposits are just that). Freetrade could take a cut if this (just like Monzo do) and then see earnings grow.

#7

I think Freetrade already make interest on the cash balance, paying that interest to customers would reduce the revenue. I can’t see how they could pay enough in interest to make it attractive as a place to store cash, while still making a profit

#8

Yes I know Freetrade do, but none flows to me. If, like Monzo, Freetrade could give me access to a 1% interest rate account, for example, then they could take 10-20% of that I would be prepared to leave cash in Freetrade. This would mean Freetrade get 10-20% of the interest rate on my cash. At the moment I never leave any money in my account as all my cash sits in other accounts and so Freetrade get no revenue from me. If Freetrade moved to this option I believe they would be better off.

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#9

Have you seen interest rates recently? It would be trivial amounts of interest…

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#10

1% per annum is not trivial. Having cash earning nothing is a huge drag on portfolio performance over time.

#11

Another company I use occasionally(if I’m forced to) deposits my money IMMEDIATELY and for withdrawal I get in 1 or 2 days. Why Freetrade can’t is beyond me. I would quite like more transparency from Freetrade regarding this issue. No one likes a “fly man”

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#12

"The current Bank of England base rate is 0.1%. It was cut on 19 March 2020, just a week after being cut to 0.25%. It had been at 0.75% since 2 August 2018.

Before August 2018, it had stood at 0.5% since November 2017. Between August 2016 and November 2017, the base rate was at a historic low of 0.25%. Prior to that, it spent seven years at 0.5%. It tumbled to this point after the 2008-9 financial crisis. Before that, it was much higher at 5%."

Read more: https://www.which.co.uk/money/mortgages-and-property/mortgages/getting-a-mortgage/bank-of-england-base-rate-and-your-mortgage-albl35s6phq0 - Which?

I guess it boils down to not sending money to Freetrade if you’re going to end up withdrawing it again as i’m not sure Freetrade would be able to offer 1% interest per annum, given current rates. I also don’t think keeping cash elsewhere makes much of a difference at 0.1% interest!
At least if the money is already in Freetrade it’s ready to deploy straight away.

#13

The 1% was an arbitrary figure but clearly it’s possible as five banks currently offer currency accounts with those rates or better.

I guess my point is I would like to use Freetrade to manage all of my cash and shares and so if they could implement this figure I would but currently I never leave any funds there and so Freetrade makes no interest off of me.

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#14

Understood, and i agree that this would be the ideal situation. However current interest rates mean that the only way to earn a decent amount of interest on your cash would have to be in a long-term fixed account. For readily available cash it’s more or less non-existent at FT or elsewhere. (if you’re aware of any high paying interest rate saving accounts please do let us know because my savings are earning next to nothing at my bank)

Freetrade allows us to trade stocks for free, i don’t know if we should expect them to pay us interest on cash deposited also? I believe that’s the trade off. i.e - we could get interest on cash deposited but then we may have to pay for any trades we do.

So that’s part of their business model: - It’s like using social media for ‘free’ and have them make money off of our personal data. We use them and don’t get a cut of those revenues.

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#15

My understanding is that most of the major American brokerages allow free trading and pay interest on idle balances. This also includes Robinhood which is going to become a major competitor for Freetrade.

I think this is a trick which Freetrade are missing. Say they could do a deal with Marcus or something, and take a cut of the rate (say 0.8% in total with 0.5% going to the user and 0.3% going to Freetrade) then Freetrade would make more money than they currently do.

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#16

Robinhood use revenue streams in the US that are illegal in the UK, there’s no way they can use the same business model over here. Their offering might end up being significantly different over here

It would be nice to get interest, and maybe there is way they can make it work. but I’m sure they wouldn’t be able to offer a very competitive rate and I expect not many people would hold large cash balances

#17

But the other brokerages?

#18

A bank is quite a different proposition to broker in their ability to offer interest on cash balances.

Some US brokers do offer interest, but my understanding is that they take your cash balance and lend/place in money market funds - something that from a regulatory standpoint Freetrade cannot do.

Totally agree though - some form of innovation with the likes of Marcus would be excellent for all parties but I expect not withstanding issues around alignment, it would be technically quite challenging from a banking/treasury management perspective.

Specifically on fund withdrawal, this defo needs to be faster. I remember taking part in some early user testing pre-release and we had a chat around managing user expectations, especially around settlement and transfer of funds. The near instantaneous faster payments infrastructure / always on mobile everywhere experience feels incongruent with reality of settlement and funds transfers, not just at Freetrade but other brokers too, that sit within the same banking group!

#19

Our balances are currently held in a bank account as Freetrade are currently earning interest on those balances so the treasury management issues can’t be a massive hurdle.

I understand not much can be done about settlement times as those are dictated by the broader market but instant deposits/withdrawals does seem to be a feature which Freetrade should pursue.

#20

I work at Freetrade and use the app regularly. For me, the existing payments options are the most frustrating feature on the app — so trust me, I feel your pain!

This is something that we are working on as we speak and if you tuned into the last AMA we did, you would have seen Duncan Leslie (our VP Product) talking about these improvements. They’re also featured on the Building Freetrade update that we just made.

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