Revolut becomes the first neobank to launch stock trading services

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The UK neobank has rolled out a commission-free stock trading service across Europe, according to TechCrunch. Initially, the service will only be available to a select number of its Metal card customers, but the neobank is aiming to introduce the service for its Standard and Premium users in the next few weeks.

Users with a Metal card — which comes with a cost of £12.99 ($15.72) or €13.99 ($16.93) — get 100 instant free trades, while Standard and Premium customers get eight and three, respectively. Trades made outside of the allowance have a £1 ($1.21) fee and an annual custody fee of 0.01%.

The feature currently allows users to invest in 300 US-listed stocks on NASDAQ and NYSE, but over time Revolut plans to add UK and European stock, as well as Exchange Traded Funds (ETFs).

Here's what it means: With an easily accessible trading service, Revolut can differentiate from competitors and will likely see high demand from users.

Revolut is the first neobank to dip into trading. The startup has allowed users to buy, hold, and exchange cryptocurrencies within its app since early 2018. The latest feature has long been anticipated, and rumors around Revolut launching a stock trading service emerged as early as June 2018. No other major neobank in Europe currently enables users to trade stocks within their app, allowing Revolut to differentiate itself from the competition, which may draw more consumers toward the startup.

Additionally, UK consumers are interested in investing in the stock market. Across all demographics in the country, nearly 50% of consumers would consider investing in the stock market, yet only 1 in 5 has done so. Gen Z is the most interested in investing, and given that Revolut's users are likely skewed toward younger generations, there will probably be high demand from users to try out the new trading feature. And being able to buy shares for as little as $1 will probably be a welcomed feature for those users starting to build their wealth.

The bigger picture: As competition in the neobank space continues to heat up, differentiation is becoming vital to survival.

Established neobanks like Revolut are being challenged by other fintechs moving into the banking space and big techs upping their financial services. As such, it's becoming increasingly important for the likes of Revolut to broaden their product suites to become one-stop hubs for financial matters. This gives them a stickier value proposition and makes it more likely consumers will choose them over competitors.

Moreover, by adding features to its multitiered premium products — such as more free trades — Revolut might be able to sign up additional paying users. Eighty thousand users signed up for the neobank's Metal card one month after its launch. So, adding more value to the cards will probably convince even more users to sign up for the paid service, which will help increase Revolut's revenue stream. The neobank should continue to add more features to increase sign-ups.

Here's an industry opinion, as told to Business Insider Intelligence:

“Typically, startups are in a race to get distribution before incumbents find product market fit. Revolut has massive distribution, which means if it can continue to be good at product, it will be a formidable competitor for incumbents and fintech startups alike. Having a single app that does everything well is a massive challenge, but companies in Asia like WeChat and Alipay have shown that the prize for getting it right is massive.” — Brad van Leeuwen, VP of partnerships and marketing at Railsbank

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