Revolut introduces commission-free stock trading in the US

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 US customers commission-free stock trading for the first time, CNBC has learned.

According to CEO and founder Nik Storonsky, the startup will announce Tuesday that it has secured a U.S. broker-dealer license that will allow it to compete with Robinhood and Square in the glowing world of retail.

Revolut was founded in 2015 and has grown into one of the dominant European fintech companies by constantly developing new features. The app started out as a way for people to avoid currency conversion fees while traveling, but quickly added banking, trading, and crypto features to dozens of products. It now has more than 16 million customers.

That approach helped the company gain a massive $ 33 billion valuation in July from investors like Softbank and Tiger Global, companies who see London-based Revolut as contenders to develop the first global financial super app. But to get there, it has to crack the US market, where competitors from Robinhood to Chime have already staked out corners of the fintech ecosystem.

“We’re building a single app that will allow people to manage all aspects of their finances, from banking and foreign exchange to cryptocurrency and stock trading,” said Storonsky. “We strive to break down common entry barriers in all aspects of stock trading, such as minimum accounts and complex interfaces.”

Revolut was launched in the US last year when the pandemic began and has since added huge interest savings, small business banking, US-Mexico wire transfers, and cryptocurrency trading.

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

Revol

Trading retail stocks might give it the broadest appeal, however: more than 20 million new investors have entered the battle since last year, according to JMP Securities. In the midst of the trading boom, from which disruptors and legacy players alike have benefited, others want to step in: PayPal is working on its own stock trading platform, CNBC reported last month.

Revolut is testing its stock trading service, which allows users to buy ETFs and stocks from NYSE and Nasdaq-listed companies, said Ron Oliveira, head of Revolut’s US operations. It will be available in a few months and will eventually allow fractions of stocks to be bought and change to be invested from card transactions.

It took the Financial Industry Regulatory Authority 16 months to acquire the broker-dealer license, Oliveira said. In particular, Revolut is approved as an “introductory broker” and will rely on New Jersey-based fintech DriveWealth to clear trades, as well as Revolut’s European trading business, he said.

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

Payment for order flow

While a Revolut manager said in 2019 that its European operations would not rely on paying the flow of orders, an industry practice where market makers pay brokers for client orders, the U.S. business is evolving into a different approach.

Revolut will earn revenue from the flow of orders in the US, according to a spokeswoman. The tactic is one of the most important ways Robinhood is generating revenue, and it’s under scrutiny by Securities and Exchange Commission chairman Gary Gensler.

Revolut is also working with regulators on its U.S. bank charter application in California, which was first reported by CNBC last year, Oliveira said. That process is not expected to be completed this year, he said.

The company will eventually seek a public listing in the UK, the US, or maybe a double listing, Storonsky said. After Revolut raised $ 800 million in July, it should be done raising money 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 any additional capital from outside investors.”

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