Revolut launches commission-free equity trading in the United States

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Revolut CEO Nikolay Storonsky speaks on stage at the TechCrunch Disrupt conference in San Francisco, California.

Kimberly White | Getty Images

Revolut, the global fintech player valued at $ 33 billion, will soon be offering commission-free equity trading to U.S. clients for the first time, CNBC has learned.

The start-up is expected to announce on Tuesday that it has obtained a brokerage license in the United States, allowing it to compete with Robinhood and Square in the scorching world of retail, according to CEO and founder Nik Storonsky.

Founded in 2015, Revolut has grown into one of Europe’s leading consumer fintech companies by continuously stacking new features. The app started out as a way for people to avoid currency conversion fees on the go, but quickly added banking, trading, and crypto functionality among dozens of products. Today it has more than 16 million customers.

This approach saw it earn a massive $ 33 billion valuation in July from investors like Softbank and Tiger Global, companies that see London-based Revolut as a candidate for the creation of the world’s first super app. global financial. But to get there, it must break into the US market, where competitors from Robinhood to Chime have already staked out corners of the fintech ecosystem.

“We are building a single app where people can manage all aspects of their finances, from banking and foreign exchange to cryptocurrency and stock trading,” Storonsky said. “We look forward to breaking down common barriers to entry into equity trading such as account minimums and complex interfaces.”

Revolut was launched in the United States last year just at the start of the pandemic and has since added high-interest savings, small business banking, US-Mexico remittances, and commerce. of cryptocurrency.

Revolut’s trading feature allows users to buy or sell popular US stocks, including Apple, Tesla, and Beyond Meat.

Revolution

However, retail stock trading may give it the greatest appeal to date: More than 20 million new investors have joined the fray since last year, according to JMP Securities. Amid the trade boom, which has benefited disruptors and incumbents, others are looking to get started: PayPal is working on its own stock trading platform, CNBC reported last month.

Revolut is testing its stock trading service that will allow users to buy ETFs and stocks of companies listed on the NYSE and Nasdaq, according to Ron Oliveira, head of US operations at Revolut. It will be available in a few months and will eventually allow you to buy fractions of shares and invest the spare currency for card transactions.

It took 16 months to acquire the securities broker’s license through the Financial Industry Regulatory Authority, Oliveira said. Specifically, Revolut is approved as an “introductory broker” and will rely on New Jersey-based fintech DriveWealth to clear trades, just like Revolut’s European business operations, he said.

FINRA “took a deep dive – they asked a lot of questions because they wanted to see exactly what the consumer experience was,” Oliveira said. “It took them a while to get comfortable, but we’re very happy they got there.”

Payment for order flow

While a Revolut executive said in 2019 that its European operations would not be based on payment for order flow, an industry practice where market makers pay brokers for customer orders, the U.S. company is getting ready to take a different approach.

Revolut will receive payment for revenue from the order flow in the United States, according to a spokesperson. Tactics are one of the primary ways Robinhood generates income, and it’s a practice closely scrutinized by Securities and Exchange Commission Chairman Gary Gensler.

Revolut is also working with regulators on its application for a U.S. banking charter in California, first reported by CNBC last year, Oliveira said. This process is unlikely to be completed this year, he said.

The company will eventually aim for a public listing in the UK, US or perhaps dual listing, Storonsky said. After raising $ 800 million in July, Revolut should have finished raising funds from private investors, he said.

“That will be my hope, because the reality is that we are generating free cash flow,” he said. “We shouldn’t need additional capital from outside investors.”

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