- Freetrade is an English fintech company offering a freemium share dealing service. The company was founded by Adam Dodds, Viktor Nebehaj, and Davide Fioranelli to give ordinary consumers access to brokerage-free trading.
- Freetrade operates under the freemium model in which users can pay for additional features across three different monthly subscriptions: Freetrade ISA, Freetrade SIPP, and Freetrade Plus.
- Freetrade also makes money via currency conversion fees and the interest it collects from the funds it loans to other institutions. The latter is otherwise known as net interest margin and in the United Kingdom averages 1.3208%.
Business Model Element | Analysis | Implications | Examples |
---|---|---|---|
Value Proposition | Freetrade’s value proposition is centered around: – Commission-Free Trading: Offering zero-commission trading on a wide range of stocks and ETFs. – User-Friendly Interface: Providing an intuitive mobile app for easy stock trading. – Fractional Shares: Allowing users to invest in fractional shares, making investing more accessible. – Diverse Stock Selection: Offering a broad selection of stocks and ETFs from various markets. Freetrade’s value proposition focuses on affordability, accessibility, and user-friendliness in the world of stock trading. | Appeals to cost-conscious investors by eliminating trading commissions. Provides an easy-to-use mobile app for a seamless trading experience. Lowers the barrier to entry by enabling fractional share investing. Offers a diverse range of investment options from different markets. Attracts both novice and experienced investors looking for commission-free trading. | – Commission-free trading on a wide range of stocks and ETFs. – Intuitive mobile app for easy stock trading. – Fractional share investing for accessibility. – Diverse selection of stocks and ETFs from various markets. |
Customer Segments | Freetrade primarily serves the following customer segments: 1. Retail Investors: Individual investors looking to trade stocks and ETFs. 2. Novice Investors: Beginners interested in getting started with investing. 3. Experienced Traders: Active traders seeking cost-effective trading solutions. Freetrade caters to both beginners and experienced investors, making stock trading accessible to a wide range of individuals. | Provides an investment platform for retail investors seeking cost-effective options. Attracts novice investors interested in starting their investment journey. Appeals to experienced traders looking for a commission-free trading platform. Serves a diverse user base with varying levels of investment experience. | – Individual investors looking to trade stocks and ETFs. – Novice investors interested in getting started with investing. – Experienced traders seeking cost-effective trading solutions. |
Distribution Strategy | Freetrade’s distribution strategy includes: – Mobile App: Providing a user-friendly mobile app for stock trading. – Online Platform: Offering a web-based platform for trading and account management. – Referral Program: Encouraging users to refer others and earn rewards. – Educational Content: Providing educational resources to inform and engage users. Freetrade ensures accessibility through its mobile app and online platform, leverages referrals for user growth, and offers educational content to support its user base. | Provides users with the convenience of mobile app and web-based trading options. Attracts users through a referral program that incentivizes recommendations. Enhances user engagement and knowledge through educational resources. Offers multiple avenues for users to discover and engage with Freetrade’s services. Ensures a user-friendly experience. | – User-friendly mobile app for stock trading. – Online platform for trading and account management. – Referral program incentivizing user recommendations. – Educational content to inform and engage users. |
Revenue Streams | Freetrade generates revenue through several streams: 1. Freetrade Plus: Offering a premium subscription with enhanced features and benefits. 2. FX Conversion Fees: Charging fees for currency conversion during international trades. 3. Interest on Cash: Earning interest on uninvested cash balances. 4. ISA Fees: Offering Individual Savings Account (ISA) services with associated fees. 5. Securities Lending: Earning income from securities lending. Freetrade diversifies its income sources through premium subscriptions, fees, and interest on cash. | Generates revenue from premium subscriptions with added features and benefits. Earns income from currency conversion fees during international trades. Capitalizes on uninvested cash balances by earning interest. Offers ISA services with associated fees. Benefits from securities lending activities. Diversifies revenue streams for financial sustainability. | – Offering premium subscriptions with enhanced features. – Charging fees for currency conversion during international trades. – Earning interest on uninvested cash balances. – Providing ISA services with associated fees. – Benefiting from securities lending activities. |
Marketing Strategy | Freetrade’s marketing strategy involves: – Digital Advertising: Utilizing online advertising channels for user acquisition. – Referral Program: Encouraging users to refer friends and family. – Educational Content: Creating informative content to engage and educate users. – Community Building: Fostering a sense of community and user engagement. Freetrade focuses on digital advertising, referrals, educational content, and community building to attract and retain users interested in stock trading. | Attracts users through digital marketing channels, reaching a broad audience. Utilizes referrals to expand its user base and incentivize recommendations. Engages users with educational content to enhance their knowledge. Fosters a sense of community and encourages user engagement. Implements a multifaceted marketing approach tailored to its target audience. | – Utilizing online advertising channels for user acquisition. – Encouraging users to refer friends and family through a referral program. – Creating informative content to engage and educate users. – Fostering a sense of community and user engagement. |
Organization Structure | Freetrade’s organizational structure includes: – CEO and Leadership Team: Led by the CEO responsible for strategic direction. – Product Development: Teams dedicated to app and platform development. – Sales and Marketing: Engaging in user acquisition and marketing efforts. – Customer Support: Providing assistance and support to users. – Finance and Operations: Managing financial aspects and operations. Freetrade maintains a structure that supports product development, user acquisition, customer support, and financial management. | Led by a CEO responsible for strategic direction and decision-making. Emphasizes continuous app and platform development. Engages in user acquisition and marketing initiatives. Offers dedicated customer support for user satisfaction. Manages financial aspects and ensures smooth operations. Maintains a structure aligned with core functions and business goals. | – Led by a CEO responsible for strategic direction. – Teams dedicated to app and platform development. – Engaging in user acquisition and marketing efforts. – Providing assistance and support to users. – Managing financial aspects and operations. – Aligning with core functions and business goals. |
Competitive Advantage | Freetrade’s competitive advantage is derived from: – Commission-Free Trading: Offering zero-commission trading, attracting cost-conscious investors. – User-Friendly Interface: Providing an easy-to-use mobile app for seamless trading. – Fractional Shares: Enabling fractional share investing for accessibility. – Diverse Stock Selection: Offering a broad range of investment options. – Premium Subscription: Offering added features and benefits through Freetrade Plus. Freetrade’s strengths in commission-free trading, user-friendliness, fractional shares, stock selection, and premium offerings position it as a competitive player in the online brokerage industry. | Sets itself apart by offering zero-commission trading, appealing to cost-conscious investors. Provides a user-friendly mobile app for a seamless trading experience. Lowers the entry barrier by enabling fractional share investing. Offers a diverse range of investment options to cater to various preferences. Enhances its value proposition through premium subscriptions. Maintains a competitive edge in the online brokerage space. | – Offering zero-commission trading for cost-conscious investors. – Providing an easy-to-use mobile app for seamless trading. – Enabling fractional share investing for accessibility. – Offering a diverse range of investment options. – Enhancing its value proposition through premium subscriptions. – Maintaining a competitive edge in the online brokerage industry. |
Origin story
Freetrade is an English fintech company offering a freemium share dealing service. The company was founded by Adam Dodds, Viktor Nebehaj, and Davide Fioranelli in 2016.
Freetrade CEO Adam Dodds created the platform to become:
“an easy, affordable, reliable alternative to traditional share brokers, with the firm belief that investing should be a thoughtful, long-term exercise, not a get-rich quick scheme.”
With a background in accounting and financial auditing, Dodds tried to set up an investment account in the United Kingdom and was surprised at how difficult and expensive it was.
Considering brokers were charging £12 for each transaction, he realized there was a massive opportunity to eliminate these commissions and pass the savings on to consumers.
Freetrade was then launched in October 2018, with crowdfunding playing an important part in making the company operational.
One participant in this process was Viktor Nebehaj, a former Google employee who was then employed to help Dodds grow the business.
Rather than using brokers, Freetrade connects directly with the London Stock Exchange (LSE) to reduce the cost of each transaction.
The platform is popular with 26 to 35-year-old traders who prefer to invest in exchange-traded funds, with 50% of new customers new to share trading in general.
In this way, Freetrade occupies a corner of the market wedged between social-media-based meme trading apps and traditional brokers with convoluted and expensive procedures.
Freetrade is now an award-winning app with over 1 million users.
Following a March 2021 funding round, the company achieved a post-money valuation of $366 million with approximately $1.4 million in quarterly revenue.
Freetrade revenue generation
With no commission charged for brokerage services, the company operates under the freemium business model where customers can pay for extra features.
Freetrade revenue streams include premium subscriptions, currency conversion fees, and the interest the company receives from cash sitting in user accounts.
Premium subscriptions
Most company revenue comes from three monthly subscription choices:
- Freetrade Stocks and Shares ISA (£3/month) – a basic general investment account featuring free trades and fractional share trading. Here, users pay for access to an individual savings account (ISA) which allows them to avoid paying income tax or capital gains tax for the first £20,000 in investments.
- Freetrade SIPP (£9.99/month) – a self-invested personal pension plan with free transfers and no share dealing charges. SIPP investments can only be accessed once the customer reaches the age of 55.
- Freetrade Plus (£9.99/month) – a premium membership account with access to perks such as limit orders, stop losses, curated stock collections, and priority customer service. The company also offers 3% on cash up to a maximum deposit of £4,000. Freetrade Plus members get free access to the ISA account and can pay a reduced rate of £7/month for the Freetrade SIPP subscription.
Currency conversion fee
For every trade made in a currency other than British pounds, the company charges a currency conversion fee.
The fee is 0.45% plus a spot exchange rate fee charged by the participating forex exchange.
Interest on cash
Like many similar platforms, Freetrade also makes money by lending out the funds residing in customer accounts to other institutions and collecting interest.
This interest is more formally known as net interest margin, which was reported at 1.3208% in the United Kingdom during 2020.
Key Highlights
- Foundation and Purpose: Freetrade, an English fintech firm, was founded in 2016 by Adam Dodds, Viktor Nebehaj, and Davide Fioranelli. The company’s core aim was to democratize brokerage-free trading, making it accessible to ordinary consumers.
- Operating Model and Offerings: Freetrade employs the freemium model for its share dealing service. Users can opt for three distinct monthly subscriptions: Freetrade ISA, Freetrade SIPP, and Freetrade Plus. These subscriptions provide various features and benefits for users willing to pay.
- Revenue Generation Strategies: Freetrade employs a multi-faceted revenue generation approach, including:
- Premium Subscriptions: The company earns significant revenue through three premium subscription tiers, offering specialized services and benefits. These include Freetrade Stocks and Shares ISA, Freetrade SIPP, and Freetrade Plus.
- Currency Conversion Fees: For trades executed in currencies other than GBP, Freetrade levies a currency conversion fee of 0.45%, accompanied by a spot exchange rate fee from the participating forex exchange.
- Interest on Cash: Like other platforms, Freetrade earns interest by lending funds stored in user accounts to other institutions. This practice, known as net interest margin, generated an average of 1.3208% in the UK during 2020.
- CEO’s Vision and Platform Creation: CEO Adam Dodds established Freetrade to provide a user-friendly, affordable, and reliable alternative to traditional share brokers. His background in finance and accounting, combined with the frustration of encountering high transaction costs, led him to create a platform that eliminated commissions.
- Operational Approach: Freetrade stands out by directly connecting with the London Stock Exchange (LSE), sidestepping traditional brokers. The platform caters to investors aged 26 to 35, particularly those interested in exchange-traded funds. This unique positioning bridges the gap between meme trading apps and complex traditional brokers.
- Growth and Recognition: Since its inception, Freetrade has garnered remarkable success. With over 1 million users, it has become an award-winning app. Notably, a funding round in March 2021 resulted in a post-money valuation of $366 million and a quarterly revenue of around $1.4 million.
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