Revolut’s US stock trading rollout is too late to grab investing boom

The news: The UK neobank giant secured a US broker license to capitalize on the retail trading boom that has made the likes of Robinhood household names, per CNBC.

How we got here: Revolut launched its banking services in the US in March 2020 through a partnership with Metropolitan Commercial Bank and then added crypto trading in July that year. It already offers stock trading in the UK, where it provides one commission-free trade a month for standard users before charging fees.

How will it fare? Revolut faces tough competition from well-established digital brokers—and retail trading may already have peaked.

Digital brokers in the US added more than 20 million new accounts since the start of the pandemic, so while Revolut has over 300,000 customers in the US that will have instant access to its stock trading service, many of them likely already use another digital broker and have little reason to switch:

  1. The neobank plans to earn revenues on payment for order flow like Robinhood does, meaning it’s unlikely to differ on pricing.
  2. With the wide range of options to choose from, retail traders expect more than just easy stock trading from their digital brokers. Robinhood, for example, plans to add longer-term wealth-building tools that complement day trading, like individual retirement accounts and recurring crypto investments.

And the mass user windfall over the past year has abated.

  • Lockdowns were a big culprit in encouraging everyday consumers to start trading. But now that they’ve been vaccinated, many are stepping away from their screens and resuming pre-pandemic activities.
  • DriveWealth, which powers the underlying infrastructure for stock trading for fintechs, including Revolut for both the UK and now the US, reported a slowdown in trading for April and May following Q1’s record.
  • And in its Q2 public filings, Robinhood shared that equity-based transaction revenues actually fell by 26% YoY to $52 million, pushing crypto trading to represent more than half of its transaction revenues.

Bottom line: Revolut is at a different stage of maturity in trading compared with digital brokers. While it’s looking to scoop up its first US trading customers, Robinhood and its ilk are launching more advanced trading features for their already massive user bases. This stark difference creates a tough journey for Revolut to catch up.

Want more? For a deeper dive into how stock trading fits in with Revolut’s strategy to build a stickier ecosystem, read this article from our Banking Briefing.