Revolut challenges Freetrade with US-only commission-free stock trading

By Oliver Smith on 1st August 2019

Fintech

It’s been a long time coming, but Nikolay Storonsky’s digital banking app finally has trading news to share.

Revolut challenges Freetrade with US-only commission-free stock trading
Image source: Revolut.

Today Revolut is rolling out commission-free share trading to a select group of its Metal card customers, with a wider launch coming to all customers within weeks.

The move has been a long time coming, with CEO Nikolay Storonsky having mentioned the service publicly multiple times since at least 2017 and the company even published a blog post pre-announcing the feature over 12 months ago.

To start off Revolut’s share trading will be focused entirely on US stocks, with 300 NYSE and NASDAQ shares being listed.

Andre Mohamed, Revolut’s head of wealth and trading who joined from rival Freetrade in November, told AltFi the US-only decision was based on customer demand.

“We did a bit of polling and asked our users what they are more interested in investing in, and most people were interested in US stocks, so that’s why we launched US-only,” he said.

The US-only universe of shares appears also to be a restriction of Revolut’s execution arrangement with US fintech DriveWealth—although Mohamed says Revolut’s universe will expand to include UK, European and "worldwide” stocks in the future.

“We probably won’t do that with DriveWealth, we’ll go a different way and we’re actively exploring that. It’s a trade-off between how quickly we want to do it and what access we want connecting to venues in Europe.”

On the staggered rollout, which starts with Revolut’s £12.99/month Metal cardholders, Mohamed described it as both a kind of “public beta” and also a reward for the company’s most loyal customers.

Revolut’s business model takes a page from Freetrade’s playbook with a freemium model, albeit with a set amount of free trades (Metal customers get 100, Premium customers get eight, Standard customers get three) followed by a £1/trade fee thereafter.

Unlike Freetrade, Revolut is also charging an annual custody fee on portfolios, albeit of only 0.01%.

Read more: Freetrade Review - May 2019

Also unlike Freetrade, Revolut also requires customers wanting to invest to convert their balances into US Dollars using Revolut’s automatic conversion process.

“There are no additional hidden FX charges, and you’re free to convert US Dollars back into local currencies,” added Mohamed.

At launch Revolut is also including fractional shares, something Freetrade only recently added, opening up premium US shares like Apple (currently priced at $208/share) and Tesla ($242/share) to a wider audience.

In response to Revolut’s launch, Freetrade CEO Adam Dodds told AltFi: "I think the entrance of new players in the space is a good thing. Ultimately, it’s going to help introduce investing to way more users. As people start to get more confidence and familiarity, I’d love to see a move towards the substance of long-term investing - stuff like index tracking, ETFs, and making the most of your ISA, instead of focusing on flashy US stocks alone.”

Revolut's CEO Nikolay Storonsky added that the share trading launched today is only the start, with upcoming planned features including Exchange Traded Funds (ETFs), a Stocks and Shares ISA, and plans to take stock trading beyond Revolut’s European Economic Area customers in the future.