Stock Trading Apps Raise $ 4 Billion in Europe Amid Retail Investment Boom

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  • European wealth technology applications raised record funding in 2021, as retail investing became more popular.
  • Crypto, market highs, low interest rates, and rising inflation all fuel interest.
  • Investing in stocks has historically been less popular among European savers than in the United States.

Record interest rates, confined consumers and a wave of new wealth applications are helping to move Europe from a region of savers to a continent of investors.

The advent of trading applications and the introduction of wealth functions by


neobanks

like Revolut in the UK have turned investing into a regular business. Widespread interest has spawned a vast array of new wealth tech startups across the bloc, and global investors are taking note.

European industry startups, which range from trading apps to robo-advisers, have raised a record $ 4 billion in venture capital so far this year, according to data from Dealroom.

“If you look at interest rates in developed markets, they are indeed negative,” said Sandeep Bakshi, partner at Prosus Ventures and investor in the Dutch stock trading app Bux.

“If you save money, you basically lose it,” he added. “So when you look at the number of savings accounts in Europe, that is, in fact, the size of the addressable market.”

In the UK, at least 3.2 million people have downloaded a wealth app since the start of the COVID-19 pandemic in March 2020, data from App Radar, an analytics platform, showed.

Freetrade, a UK stock exchange app founded in 2018, had around 50,000 users at the start of 2020. By March 2021, that number had risen to 600,000. Now, the startup said, that number exceeds one million.

The Commercial Republic of Germany also said it had grown from 150,000 users in 2020 to over 1 million, which helped it secure new funding at a valuation of $ 5.3 billion in May. .

Another trading platform, eToro, said it gained 3.1 million new users in the first quarter of 2021 – a significant increase from the million people who signed up during the same period last year.

Republic share trading

Trade in shares of the Republic.

Commercial republic


Popularity of the pandemic

The European crop of trading apps may be keen to distance themselves from regulatory issues faced by its US counterparts such as Robinhood. The trading app has drawn the attention of lawmakers to its role in allowing inexperienced traders to trade volatile stocks, such as GameStop, in 2020 and risk huge losses.

Trading applications in Europe are regulated differently by jurisdiction, and most companies provide some form of disclaimer regarding particularly volatile options. But a tension persists between the interest of trading applications in educating – or even preventing – users from making risky trades and their interest in retaining their user base.

Investors and founders of European trading apps have said the growing interest in retail investing predates the pandemic.

“While many incumbents have suggested that the growth in retail investment is due to the boredom of foreclosure and will pass, we have proven this to be simply incorrect,” said Adam Dodds, CEO of Freetrade. He added that the number of new clients funded in October was 50% above January memes inventory highs. “The tendency for retail investors to take control of their finances and not accept high fees is here to stay,” he continued.

Established brands, such as Hargreaves Lansdown, have also seen an increase in the number of younger customers during the pandemic.

Stock picking remains more of a niche in Europe than in the United States. In Europe, total transactions made by retail investors stood at around 5%, according to the Euronext exchange, while App Radar has calculated that 12% of UK adults now use an investment app.

“While American households invest almost 50% of their savings in the stock market, less than 20% of the savings of German, French, Italian and Spanish consumers are invested in equities,” said Luca Bocchio, partner at Accel and investor in Commercial Republic.

But, he added, these platforms were changing the way people view their savings: “It is changing the European personal finance landscape, with a focus on long-term investment and savings. “

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