Revolut, the $33 billion fintech player, is rolling out commission-free stock trading in the U.S.
Revolut CEO Nikolay Storonsky speaks onstage at the TechCrunch Disrupt conference in San Francisco, California.
Getty Images , the global fintech player valued at $33 billion, will soon offer commission-free stock trading to U.S. customers for the first time, CNBC has learned.| Getty Images
Revolut, the global fintech player valued at $33 billion, will soon offer commission-free stock trading to U.S. customers for the first time, CNBC has learned.
The start-up is set to announce Tuesday that it secured a U.S. broker-dealer license, enabling it to compete with the likes of Robinhood and Square in the red-hot world of retail trading, according to CEO and founder Nik Storonsky.
Revolut, which was founded in 2015, has steadily added new features to grow its position as one of Europe’s most prominent consumer fintech companies. Although the app was originally created as an application to allow people to save money on currency exchange fees, they quickly added crypto, trading, and banking features, along with dozens more products. The app now boasts more than 16,000,000 customers.
That approach helped it garner a massive $33 billion valuation in July from investors including Softbank and Tiger Global, firms that see London-based Revolut as a contender to create the first global financial super-app. But to get there, it needs to crack the U.S. market, where competitors from Robinhood to Chime have already staked out corners of the fintech ecosystem.
Storonsky explained that the company is building an app which will allow people to control all aspects of their finances from stock trading and forex, banking, and foreign currency. We are eager to remove common obstacles to stock trading, such as minimum account balances and complicated interfaces.
Revolut launched in the U.S. last year just as the pandemic began, and has since added high interest savings, small business banking, U.S.-Mexico remittances and cryptocurrency trading.
Revolut offers a trading option that allows users to buy and sell top U.S. stocks such as Apple, Tesla, and Beyond Meat.
Retail stock trading may give it the broadest appeal yet, however: More than 20 million new investors have entered the fray since last year, according to JMP Securities. Amid the trading boom, which has benefited disruptors and legacy players alike, others are looking to jump in: PayPal is working on its own stock-trading platform, CNBC reported last month.
Ron Oliveira from Revolut’s U.S. division said that Revolut is testing their stock trading service. This will enable users to trade ETFs or shares of NYSE-and NASDAQ listed companies. The service will soon be accessible and eventually will allow you to buy fractional shares or invest spare cash from your card transactions.
Oliveira explained that the Financial Industry Regulatory Authority took 16 months to grant the broker-dealer licence. Specifically, Revolut is approved to be an “introducing broker” and will lean on New Jersey-based fintech DriveWealth to clear the trades, just as it does for Revolut’s European trading business, he said.
Oliveira explained that FINRA conducted a thorough investigation and asked a lot of questions in order to understand the customer experience. It took them some time to feel comfortable but they are very pleased with their progress.
Payment for order flow
While a Revolut executive said in 2019 that its European operations wouldn’t lean on payment for order flow, an industry practice where market makers pay brokerages for client orders, the U.S. business is shaping up to have a different approach.
A spokeswoman for Revolut stated that they will receive payment in the U.S. for order flow revenue. The tactic is one of the main ways Robinhood earns revenue, and it’s a practice under scrutiny by Securities and Exchange Commission Chair Gary Gensler.
Revolut is also working with regulators on its U.S. bank charter application in California, first reported by CNBC last year, said Oliveira. He said that this process won’t be complete in the current year.
Storonsky said that the company eventually hopes to be listed in the U.K., U.S. and possibly a dual listing. Revolut, which raised $800 million last July, should now be able to raise money from investors.
The founder stated, “That is my hope because we generate free cash flow.” External investors shouldn’t be required to provide additional capital.
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