The COVID-19 pandemic disrupted consumer and corporate behavior across the board. Some changes were obvious and quick, like cuts to business travel leading to layoffs at companies that served that space. Other changes have been more surprising.
One such new trend has been rising interest in savings and investing applications, the type of service fintech startups offer consumers. TechCrunch has covered this trend, noting a number of American fintech and finservices seeing hugely rising user activity and revenue.
Robinhood, the best-known American zero-cost trading app, has seen its trading volume skyrocket along with new user signups. Research into the company’s filings show that its revenue grew to over $90 million in the period as its income from more exotic investments like options advanced.
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The trend of growing consumer interest in saving money (reasonable during an economic crisis) and investing (intelligent when equity prices fell off a cliff in March and April) has helped smaller fintech startups as well. Personal finance platform M1 Finance and Public, a rival zero-cost stock trading service, have also seen growing demand. The trend is so pronounced that new stories seem to crop up every few days concerning yet another savings or investing fintech that is blowing up, like this recent piece concerning Current.
But as Robinhood and other U.S.-based startups are enjoying a bump, fintechs abroad are reveling. In our continuing look at what’s changing in the huge (and hugely capitalized) world of fintech, TechCrunch spoke with Freetrade’s CEO Adam Dodds about what’s happening across the Atlantic. Is Freetrade, a U.K.-based trading app that also offers commission-free trading services, also seeing a wave of consumer demand?
Free trades are popular
Speaking with Dodds about Freetrade, he described a company that is a little bit different from what we’ve become accustomed to with Robinhood. Per the CEO, payment for order flow — the thing that brought Robinhood $90 million in Q1 2020 — is banned in the United Kingdom, so his firm makes money on subscriptions for services like retirement accounts, interest on client cash that is sitting still and some income from foreign-exchange.
Freetrade is also different from Robinhood in that it has raised comparatively modest sums. Robinhood has attracted comfortably over $1 billion to date as a private company. Freetrade, in contrast, put together a £12 million ($15 million) round in 2019, half of which came from equity crowdfunding. The other half came from Draper Esprit, a European venture capital fund with an office in London, where Freetrade is based. (Even more recently, Freetrade raised an additional £7 million ($8.7 million) from equity crowdfunding.)
But very much like Robinhood, Freetrade has enjoyed rising user demand in recent months.
TechCrunch asked Dodds if the U.K., like the United States, has seen a boom in the popularity of savings and investing-focused fintech apps. The CEO confirmed that the same wave has reached his part of the world, but argued that “the boom we’re seeing right now in the U.K. is more pronounced than in the [U.S.] because there was a lower base of active investors to start.”
Around a third of individuals in the U.K. own stocks, according to Finder, while in the U.S., 55% of us are in the market.
The growth Freetrade is seeing hasn’t been linear in recent months, with Dodds telling TechCrunch that “customer growth is accelerating,” and that his company is close to having 200,000 customer accounts despite launching last April.
The CEO also said “other metrics are growing faster,” adding that the “number of trades executed on Freetrade doubled every month on average in 2020, and amongst U.K. stockbrokers, we’re now sending the second-largest volume of trades to the London Stock Exchange every day.” Freetrade is on pace to do one million trades in June, he added.
These numbers have helped Freetrade step ahead of its internal projections, with Dodds telling TechCrunch that the company is “well ahead of some previously optimistic plans.”
Rising volume and consumer interest are great, but the company will face similar challenges to Robinhood if user demand for trading falls. Falling demand could lead to slimmer accounts, perhaps limiting the ability of both companies to drive revenue. For now, however, it appears that U.K. and U.S. fintech and finservices alike were in the right place at the right time to accept a race toward buying more public equities.
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