THE EVOLUTION OF DIGITAL STOCK TRADING: The strategies incumbents and startups are using to stay relevant as Robinhood and other disruptive players reshape consumer stock trading

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Startups' entrance into retail stock trading changed the entire industry by pushing trading prices to the bottom and opening up expensive stocks to mass market consumers.

Several years ago, startups like Robinhood, eToro, and Freetrade started pulling the rug out from under incumbent stock trading platforms by slashing fees, introducing fractional shares, and providing heavily gamified interfaces, ultimately democratizing the stock market and grabbing revenues by opening the space up to new consumer demographics. 

Now, older digital trading platforms like TD Ameritrade and E*Trade, and incumbent heavyweights like Fidelity and JPMorgan Chase, have started fighting back by slashing their own fees and consolidating to bolster their digital capabilities.

As a result, startups and incumbents are now faced with the threat of a race to the bottom in terms of prices to stay competitive. The fierce competition is driving both camps to produce unique selling points beyond low prices, further reshaping the industry.

In the Evolution of Digital Stock Trading report, Insider Intelligence explains how startups sparked change in the stock trading industry; gives an overview of the key players in the stock market today, and where startups like Robinhood fit in; examines how the increasing appetite for self-directed investing is creating a growing market opportunity for startups and incumbent trading platforms; discusses the features that distinguish startups from older trading platforms; and explores other new entrants fighting for a slice of this market.

Additionally, it looks at how older trading platforms are innovating to fend off newer competitors; how both startups and incumbents are fighting to come out on top; and what key trends we expect to shape the stock trading industry going forward.

The companies mentioned in this report include: Amazon, Apple, Atom, Ayondo Markets, Bux, Charles Schwab, Citadel Securities, Coinbase, Commonstock, ErisX, eToro, E*Trade, Fidelity, Freetrade, Goldman Sachs, Interactive Brokers, Invesdor, JPMorgan Chase, JPMorgan Chase Securities, Lunar, MarketSnacks, Merrill Edge, Merrill Lynch, Morgan Stanley, Pepper, Public, Revolut, Robinhood, Scalable Capital, SoFi, Square, Stake, Stockpile, TD Ameritrade, Trading 212, Trio, TrueLayer, UBS, YouInvest, Vanguard, Virtu Financial, Wealthfront, and Xinja. 

Here are some of the key takeaways from the report:

  • The assets under management (AUM) of online investment platforms globally rose from £250 billion in 2013 to £500 billion in 2017, with 2.2 million new accounts opened in the period, per FCA data cited by the Raconteur.
  • Over 25% of US adults with internet access are self-directed investors and traders, according to Aite Group, with this group growing faster than advised traders, at 4.9% versus 1.4%, per Celent. 
  • Younger traders and investors are coming to the fore: 57% of Gen Z respondents would consider investing in stocks and shares, the highest proportion among surveyed age groups — but only 10% of Gen Zers have already invested, per Finder. This presents a market opportunity for stock trading and investing platforms.
  • As the pandemic pummels savings products' interest rates and stock markets swing more dramatically, trading platforms have an opportunity to reel in more users — if they can offer them unique, value-added features beyond low pricing. 

In full, the report: 

  • Explains how startup trading platforms have sparked change in the industry with features including low pricing and gamified interfaces.
  • Gives an overview of key players in the stock trading industry and explains how free trades are executed.
  • Explores why ever-more consumers are attracted to self-directed investing and trading, and how trading platforms can harness this appetite.
  • Lists players from outside the stock trading industry pivoting into the space to secure a share of the market.
  • Examines why incumbent trading platforms still pose a threat to tech-savvy new entrants on their turf.
  • Provides examples of how incumbent trading platforms are fighting back against startup disruptors.
  • Presents key trends we expect will shape the retail stock trading industry in the years to come. 

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