Fintech - Trading is reaching the highest peaks during Coronavirus time
The first quarter of 2020 has seen record numbers in trading for investment banks. Despite a global pandemic locking down countries around the world, some industries are still thriving. Recent months have been some of the busiest traders have experienced since the 2008 financial crisis.
In particular, fintech trading has seen huge amounts of growth, with companies such as Stake and Robin Hood stating large amounts of revenue over the last few months. Sources from Bloomberg stated that Robin Hood brought in $60 million, which is more than 3 times what it made YoY in March 2019.
Similarly, Stake had 9 times more volume of trades comparing March to December, with $250 million traded on its platform. Interestingly, Stake also reported that more money was parting hands during trades as well, with the average size of trade doubling in recent times.
With the success of the last quarter, trading apps Robinhood and Trade Republic have been using the opportunity and raising large figures during funding rounds. Trade Republic went through Series B, led by Accel and Founders Fund, where it raised $67 million. Comparatively, Robinhood’s deal has not yet closed, but Sequoia Capital looks to have led them into raising approximately $250 million.
It is difficult to predict the long term impact of the global pandemic, with markets in recent months being extremely volatile. This volatility frequently leads to big changes in the price of assets, which means traders can create profit. This is possibly one of the reasons for trading seeing such a boom recently.
Fintech trading could also be seeing a boost because in some countries investment bank traders are required to sit on a monitored trading floor to be regulatory compliant. Working from home will be putting a hold on this, however this has not been the case for online trading.
It has not been completely blue skies for fintech trading, there was a slight decrease in trade volume going from March to April. These numbers were still markedly larger than the numbers in January and December, but it showcases that the figures have not been on a complete upward trajectory.
Even so, since the start of 2020, Stake has brought in 20,000 new sign ups so far. Capitalising on its success in recent weeks, the business is targeting a July date to officially launch its brokerage packs. Up until this point, users have been able to preview these for free. These new packs will create a three tiered structure, starting with beginners on a free package, up to well experienced investors.
Trade Republic also made new feature announcements alongside the news of going through series B. These mainly revolve around saving services. Whether these were planned for a long time previously or have been an agile reaction to current trends is not known. There have been many saving products rolled back by competitors in some countries, with 180 being reported in March and April in the UK.
Another fintech that has been performing well, particularly over April, is Wealthsimple. Over the course of April, Wealthsimple onboarded 7000 new users a week on average. However, there are some within the industry that point out that the success of these fintechs during the global pandemic is slightly at odds with their performance before the outbreak. Alexander, the director of Deloittes, suggests that fintechs were having difficulties getting the attention of potential users previously.
Until the pandemic is over, lockdown is ended, and economies around the world show signs of recovery, predictions of long term performance because of the pandemic is speculatory. The immediate successes these companies have had is evident, but it’s impossible to predict what difficulties are still to come.
Over this short period of time, there is no doubt these fintech organisations are performing well. This is arguably based on their availability at a time when traditionally money can be made through investment. If these companies are able to use the boost in finances effectively to create a solid strategy moving forward into the future, then we could see a monumental shift in trading practices. Time will tell exactly how the market reacts to the changes of the last few months, but it is certainly an exciting time for fintech business and trading.