How digital brokers can address Europe’s lack of investing appetite

What we’ve been thinking: A host of European digital brokers are eagerly expanding across the continent to become the trading app of choice. Today, we analyze how local players who have yet to mirror the success of eToro can get ahead.

What do we mean by being like eToro? The fintech, which is available in 140 countries, has more than 20 million users, 69% of whom are based on the continent. The next largest digital brokers in the region are nowhere near its size—Bitpanda has 3 million users, and Trade Republic and Freetrade each have 1 million.

The challenge in Europe: Digital brokers need to get more people investing in the first place—unlike in the US, where it’s more so a case of fintechs stealing market share from incumbent retail brokers.

  • Fifty-two percent of US households invest in the stock market, compared with 33% in the UK and 15% in Germany.
  • This is because even before trading apps popped up, US consumers had access to the likes of TD Ameritrade, E*Trade, and Fidelity. So digital brokers like Robinhood and Webull could draw from a large addressable market, making it easier for them to reach 18.9 million and 11 million users, respectively.
  • European brokers are trying to boost their user growth by extending their reach across the continent, but the smaller investing appetite amplifies the need for value-added features.

How to get ahead: Here are the features eToro has relied on to boost user growth in Europe.

  • Prioritize social media components over gamified interfaces. Gamified tools incentivize user engagement with effects like confetti, but much like in the US, these have drawn the ire of European regulators for potentially harming inexperienced investors. Instead, local digital brokers can better engage users with social media features like sharing and discussing trades. eToro is well known for its social news feed and the ability to mimic other traders on its platform.
  • Offer access to the widest range of assets. This creates a more unified trading experience for users and helps avoid attrition to other brokers. eToro already offers crypto trading alongside stocks. And Bitpanda, which started as a crypto exchange, added share trading in April, helping it increase its valuation threefold to $4.1 billion.