The last few months have been and will be full of change and digital developments. Within the fintech industry, digitalization has experienced a major upswing and has produced some clear winners. Especially since the start of the new year, you've probably come across the term "Neobroker" at least once. If you haven't, here's more on what Neobrokers are, how they're revolutionizing the stock business, and what developments have stood out in recent months.
Who and what stands behind Robinhood, TradeRepublic or Scalable?
These three, and many more, of the best-known Neobrokers all have the same goal - revolutionizing investing. Behind them are innovative, new concepts that democratize the stock business and make it accessible to everyone. They set themselves apart from traditional securities trading by focusing on convenient trading via smartphone at low cost.
The boom began with the investment app Robinhood from the USA, which was founded in 2013 and now already has over 10 million customers. The trend quickly spread to Germany with TradeRepublic. At the beginning of 2019, the Neobroker app entered the market with its BaFin license and was able to win over many customers, especially in the wake of the Corona crisis.
What makes Neobroker so popular?
The focus is clearly on ease of use, low to no fees and the great flexibility offered to users. With just a few clicks on the smartphone, shares or ETFs can be bought or sold - predominantly by newcomers to the broker scene.
What are the current developments in the neobroker scene?
The fact that these apps are often used by stock amateurs and are thus easily accessible to everyone is currently coming under increasing criticism.
Especially the American player Robinhood receives critical looks in the investment scene. Robinhood sells order data of its users to external financial companies before the order is finally executed. These financial companies can thus estimate in advance what investors will do in the app and can act accordingly beforehand. In addition to these financial companies, hedge funds also count, which can receive customer data early and process it strategically.
The latest happening of the new fintechs shines the spotlight on the German Neobroker TradeRepublic. The starting point was the tussle between hedge funds and private investors, with the help of stock purchases to rapidly increase the value of weakened companies. The increased rush forced the app to briefly stop orders from certain companies, which caused the online broker to draw a lot of criticism. TradeRepublic itself has spoken out to its customers about this and considers it an unprecedented incident that was not expected to happen in this way.
It can thus be seen that the new players in the fintech scene have now been able to gain very high acceptance. The potential is very great and will continue to accompany and revolutionize the broker scene in the future. However, there are also dangers associated with this, which users should be aware of. As an example, it is clear that customer data should be handled carefully and securely so as not to lose sight not only of one's company, but also of the well-being and benefits of the customer.
Data security should have a high priority, especially within the fintech industry, which we realize every day with our sales processes at BSS GmbH and can promise our customers.
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