How Apps Are Revolutionizing Access to The Stock Market

Source: Apptopia Mobile Finance Report 2020, p. 17

The recent trend of accessing stock markets via apps reflects growing interest and acceptance. Moreover, the COVID-19 pandemic has accelerated the pace of digital transformation for financial services companies. The new generation of investment apps not only shifts stock-trading services to a mobile and more technologically advanced environment, but it is completely reinventing the customer experience itself. Instead of using traditional trading channels with established intermediaries and standard fees, these new apps provide investors with a fresh way of gaining direct access to the stock market.

A new model for investment

Robinhood, founded in 2013 and available as an app since 2015, was one of the first providers to focus specifically on small and new investors. The app has gained international recognition, and its name suggests that the founders not only wanted to make markets more accessible, but also to build wealth. As the company website explains, its stated goal is “to build a financial product that gives everyone – not just the wealthy – access to the financial markets.”

A variety of other investment and trading apps focus on their own markets and niches. For example, the Acorns app (founded in the U.S. in 2012) and the Peaks app (a Dutch app available since 2016) are based on the principle of microinvesting. With these apps, payment amounts that have been linked to the credit card or payment app round up, and the difference is invested directly. Freetrade (founded in the U.K. in 2016) and Stake (launched in Australia in 2017) are already active on European markets, where they could gain a lead over Robinhood, which is currently only available to US residents. eToro, originally founded in 2007 as RetailFX in Israel, boasts users in more than 140 countries, including Germany. The app has been around since 2010 and is built on the copy trading concept, where investors can follow and emulate the most successful traders.

Rather than through commissions, these apps primarily generate income through subscription models or payment for order flow. The latter is a kickback of sorts from brokers who execute the orders and seek to earn more on each trade via bid-offer spread.