Interactive Brokers’ new global trading app is the firm’s attempt to lure younger clientele currently drawn to Robinhood Financial, according to one industry analyst.
The new mobile app, IBKR Global Trader, gives users access to more than 80 stock markets around the world, including the New York Stock Exchange, Nasdaq, the London Stock Exchange and the Hong Kong Stock Exchange, plus Bitcoin, Bitcoin Cash, Ethereum and Litecoin, according to the app’s website.
The app also lets users deposit their money in one of 23 currencies, trade in fractional shares and “swap” stocks in a single tap, the company says.
Adam Nasli, head analyst at international broker comparison site BrokerChooser, believes the move is aimed at luring younger generations.
Currently, the average age of an Interactive Brokers customers is 42, more on par with Charles Schwab, where the average age is 50, than with Robinhood, where the average user is 31, according to BrokerChooser.
Interactive Brokers will also need to play catch-up as far as its customer base, according to Nasli. While the brokerage has fewer than 2 million users, Webull has over 7 million — and Robinhood around 23 million, he says.
However, the average account size at Interactive Brokers is $223,000, comparable to the $245,000 average account at Schwab and far larger than the $4,000 average account at Robinhood, according to BrokerChooser.
Moreover, the average Interactive Brokers customer made 92 trades in the fourth quarter of 2021 — compared to just 12 at Schwab and 13 at Robinhood, BrokerChooser says.
Nasli, however, warns that free trading — Interactive Brokers’ new app offers commission-free trading for U.S. customers, much like Robinhood — comes with its own costs, as a result of earnings from payments for order flow.
“U.S. brokers that rely on payment for order flow provide less price improvement for the customers, the price between the executed price and national best bid-offer. Here, at BrokerChooser, we consider this missed price improvement as an implicit cost because customers would usually be better off if they chose a broker that doesn’t rely on PFOF over a broker that relies on it,” Nasli said in the statement.
Nasli also warns that regulation on the horizon could disrupt the model.
“Gary Gensler, [Securities and Exchange Commission] chair, said that the ban of PFOF is on the table. A ban on PFOF would force most commission-free brokers in the U.S. to change their business model,” he said in the statement.
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