The staid and stuffy world of investing doesn’t immediately appeal to millennials. Words such as ‘broker’ or ‘stock portfolio’ are alien to the offspring of the internet age, fed on a steady stream of Netflix and Deliveroo. But a new fleet of investment tools promise a sleek, app-ified and user-friendly revolution of the kind that the fintech pioneers brought to the banking industry.
Revolut, the most popular of this crop of digital darlings, has launched a new trading feature today, offering European customers commission free trading from the palm of their hands on shares from 300 US listed stocks on the New York Exchange and the NASDAQ – such as Amazon and Tesla.
Revolut’s trading platform has been teased since August 2018, when the company published a blog post signalling its intention to change shares investment. “Investing in the stock market has been closed off to ordinary people for far too long, which has led to real problems for people as they search for effective ways to make the most out of their savings,” Nik Storonsky, founder and CEO of Revolut, said in a statement.
The new capability will be first rolled out to Revolut’s metal card customers – its high-end banking service – before being made available to the rest of the bank’s EU-based customers in the coming weeks. (More than 1.5m of its customers are based in the UK). The company is starting with US stocks as it claims feedback from its customers showed they were the most in-demand.
But there are limitations: Revolut Metal customers can make 100 free trades per month, while Premium customers will be capped at eight, and Standard customers at three. Outside of these allowances, it will cost £1 per trade, and an annual custody fee of 0.01 per cent. This is in contrast to most EU based stockbrokers, who typically charge between £6 and £12 in transaction fees per trade. Revolut says other trading fees may apply from US regulators and that the deals are being processed by US-firm DriveWealth LLC.
So why is Revolut moving into the area? In short: to get a foot in a growing market. The last few years has seen the rise of investment apps that offer people the chance to put some of the earnings or savings into stocks and shares. The ability to make investments through smartphones has opened up new potential audiences.
The most successful, Silicon Valley based Robinhood, has tempted younger people into buying stocks, as well as supporting the trading of cryptocurrencies like bitcoin, ethereum, and litecoin. The company last week announced a funding round of $323 million (£264m) led by DST Global at a valuation of $7.6 billion (£6.22bn). Its user base consisted of more than four million people, as of May this year.
Acorns, which launched in 2014, rounds-up spending and puts that money into investments. If you fork out £9.80 on a lunch and pay through the company’s debit card it will take the extra 20p micro-invest it. The firm says more than $1 billion (£82 million) has been invested through the company. Alternatively, US-based Stash offers subscription-based investing with a series of monthly payment plans.
Of the UK’s largest challenger banks, including Monzo, N26 and Starling, Revolut is the first to begin offering its customers investment options. It is unclear whether any of the other banking apps are planning to do the same. This could give Revolut a head-start in attracting more customers.
“Trading at the moment, it’s very wealthy people – typically the 35 or 40 plus market,” says Chad West, head of communications at Revolut. “Now we can really open up to younger audiences who are looking for more savvy ways to invest their money by removing two barriers to entry: usability and accessibility.” He points out that at the moment savings accounts are seen as the go-to means of accumulating cash, despite the rates of many falling short of inflation.
The trading feature will be accessible through a tab labelled ‘Trading’ on the app, and customers will be able to select the companies they’re interested in. A graph will show the previous 12 months of stock performance, providing insight into whether it would make a wise investment decision. Setting it apart from traditional investment is the ability to buy fractional shares for as little as $1 – a boon considering that some of the most competitive companies in the world stocks are upwards of $400, peaking at $1,890.87 for a share in Amazon.
Future plans for expansion cover access to UK and European stocks, Exchange Traded Funds (ETFs) and the ability to invest via a Stocks and Shares ISA, as well as extending the capability to Revolut users outside of the European Economic Area (EEA).
The ability to invest in stocks and shares within Revolut follows the launch of its crypto trading app that debuted in March. The exchange allows any of the 29 currencies Revolut supports to be exchanged for Bitcoin, Litecoin, Ethereum, Bitcoin Cash and XRP. The crypto exchange is similar to what Coinbase does, but within Revolut’s existing app.
The new feature from the embattled fintech company comes as it is being investigated by the Financial Conduct Authority over how it handles payments.
In February this year a WIRED investigation revealed problems with Revolut’s working culture. Former staff members and employees exposed job applicants being asked to work for free, rudness and high staff turnover within the company. It promised to clean up its act.
During recent months, the company has looked to change its image. This week the firm said it would hire Metro Bank executive David MacLean as its new chief financial officer. Its former CFO, Peter O’Higgins, departed the company earlier this year saying it needed someone with more “global retail banking experience”.
But with its move into the stocks and shares trading market, how will Revolut ensure people aren’t investing irresponsibly? West says that the regulator forbids supplying investment advice. However, the bank has ensured that there are plenty of warning signs alerting customers to the possibility that they may lose their money, while volatile stocks will be highlighted in red.
“People don’t want to have six apps on their phone,” West says. “They don’t want one for their banking, one for their cryptocurrency, one for their investments, one for their insurance; if they can have everything centralised in one app, they’ll do it.”
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