TOP 4 BROKER FINTECHS IN THE WORLD
A "Broker" refers to a specialist who acts as an intermediary between buyers and sellers of securities and stocks. So, a brokerage is a fintech company with technological solutions to connect the stakeholders of the stock market. In today's article, we will introduce you to the world's four best brokerage fintech companies.
Also attached is the list of the best online brokerage companies for 2020-2021 released in February 2021 by Barron's, a financial and investment magazine published by the famous American Dow Jones & Company.
1. Interactive Brokers
(Location: Greenwich, Connecticut, USA)
Website: Home | Interactive Brokers Hong Kong Limited
About
Interactive Brokers, also so-called IBKR, provides online trading of all types of securities, including stocks, options, and futures. IBKR users can access a total of 135 stock exchanges in 33 countries and invest in 23 currencies. The casual IBKR Lite has a commission of $0, while the professional level IBKR Pro platform charges a commission of $0.0005-$0.0035 per share or 1% of the trade amount.
Fintech Model
IBKR uses an investment fintech business model. To mention the biggest among the innovative technology solutions they use, the order fulfillment system is almost the best in the industry. The system receives and transmits information about market changes very quickly, so it can analyze your order network and connect you to investment opportunities with better conditions to give you the perfect investment conditions, prices and returns, without wasting a time.
Now, you may wonder how IBKR makes a profit if they don't charge brokerage commissions like traditional brokerages for providing brokerage services. The order execution system described above earns an average of $0.43 per 100 confirmed share trades from the middle to IBKR.
In addition, if securities in your account are borrowed by another trader or hedge fund, 50% of the proceeds from the loan of the securities will be paid to the user, the owner of the securities lent, and the remaining 50% to yourself.
In this way, profits are made in a number of ways to "share" a very small percentage of income from various activities on the stock market with consumers and other parties involved in trading.
Key to success
It is characterized by the fact that there is no mandatory minimum balance in the investor's or customer's account. Also, in fall of 2020, IBKR launched an Impact Dashboard that helps investors build their investment portfolios based on their personal values and interests. Additionally, Interactive Brokers recently added ESG (Environment, Social, Governance) research menu.
IBKR users can invest in more than 8,300 commission-free mutual funds and fractional shares. A consumer with a relatively small investment can acquire this much-needed part rather than buying a Tesla item for $575.
Also, when investors open a securities account at IBKR, they can choose from 6 different types of account, including individual, joint account, pension account, trust account, friend/family advisor, and corporate account.
Not only do they offer a trading platform, but they also provide many services like automated investment management, phone apps, research and educational content. They offer training on investing, markets and programming through their TWS or Trader Workstation mobile app.
All in all, it has a very high-level, multi-menu structure, and all kinds of complex tools that investors need in one place, which is not available in other brokerage fintech companies. Because of this, it is considered a more suitable platform for intermediate and advanced investors with relatively more trading experience.
In the last year, Interactive Brokers won:
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StockBrokers.com 2021 Annual Review - 5/5 stars
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#1 on Barron's Best Online Brokers 2021 list
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2020 Benzinga Best Business Technology
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Investopedia Online Broker Awards 2020 - 4.4 / 5.0 stars
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Best Low Cost Investment Broker from Nerdwallet Best-Of Awards 2020
2. Fidelity
(Location: Boston, Massachusetts, USA)
Website: Fidelity International Usage Agreement
About
Fidelity is a fintech company with a comprehensive portfolio of tools for investors. They have started offering commission-free investments to users since October 2019. One of the disadvantages of other brokers, compared to the "big ones" in the fintech industry, is that they currently cannot trade securities such as commodities or futures. Their web-based trading platform is sufficient for casual use, while their downloadable platform, Active Trader Pro, is for more professional investors.
Fintech Model
Fidelity, which operates using the Investment Fintech Business Model, has a rich selection of stock screeners. Their "stock screener" helps the investor distinguish stocks that meet his criterias among a huge number of stocks, and has a total of about 140 types of criteria. There are many pre-made screener templates that can distinguish stocks, ETFs, fixed income, options, etc., and they can be customized by the user. An ETF (Exchange Traded Fund) is a type of securities that combines certain types of securities and collects information by tracking, for example, the SPDR S&P500 ETF tracks index. Fixed income is an asset or security that provides investors with a fixed amount of interest or dividends. Screeners also have categories with 21 different topics, such as Robotics, Natural Foods, Cloud Computing, etc.
Key to success
For the past five years, the company has focused on price improvement and developed a trading algorithm that aims to avoid payment for order flow or PFOF at a very high level. In simple terms, the price improvement refers to an algorithm that finds an offer price that is better than the current market price of any stock. Payment for order flow simply refers to the money received by brokerage companies for transmitting and executing the orders of trading participants. In general, this means that you will be able to find an investment with a better value, but you will not be charged more commissions or fees.
Then, one of the ways they make their own profit is the same principle as Interactive Brokers. With your consent, the securities you own are lent and the proceeds are shared with you. In 2 months, 38% of all account holders who received this type of loan earned $100 or less, 37% earned between $100 and $1,000, and the remaining 25% earned more than $1,000.
There is a concept called NBBO or National Best Bid or Offer. This is a requirement from the SEC (Securities Exchange Commission), a regulatory body, that broker companies must trade with the lowest possible ask price and the highest bid price. So 96% of all orders in Fidelity's field trade at a better price than the NBBO price.
Finally, Fidelity automatically invests your uninvested money in a money market fund. When you're not using it, your money is put into a "money market fund" that invests in highly liquid assets and securities that earn you a return and immediately put the money back when you need it to trade. Imagine that even your uninvested money automatically earns you profit isn’t that unbelievable?
3. TD Ameritrade
(Location: Omaha, Nebraska, USA)
Website: Online Stock Trading, Investing, Online Brokerage | TD Ameritrade
About
Ameritrade is known as a fintech company that has created an investment platform that is ideal for "beginner" investors. They offer three different platforms, including a main website page, a mobile app, and thinkorswim, which focuses on derivatives trading. The company currently operates with 11 million account holders with a total asset value of $1 trillion. Ameritrade has been sold to Charles Schwab, number 5 on the attached list above, but this process will take some time to complete, so we will present it as an independent company for now.
Fintech Model
They use a fintech investment model. Based on the above-mentioned PFOF (payment for order flow) principle, the company earns a commission of approximately $0.0012 per share.
Key to success
Their trading platform is accessible directly from common social networking sites such as Twitter and Facebook.
The design and structure of their platform is very simple and intuitive, allowing users to view their important information such as account information, balance, balance history, news, etc. on a single page.
Ameritrade's biggest focus is educational services. They focus more on beginner investors, helping them gradually discover a wider variety of asset classes as their skills improve. The amount of data, research and investment tools that Ameritrade's thinkorswim platform offers to users is almost overwhelming. The platform has also managed to gain a certain share in the Chinese market, and has translated its fields into Simplified and Traditional Chinese.
In addition, they not only conduct online activities, but also personally visit the offices of more than 280 official organizations, organize training sessions and work face-to-face with their customers.
4. E*Trade
(Байршил: Arlington, Виржиниа, АНУ)
Веб хуудас: E*TRADE Financial | Investing, Trading & Retirement
About
E*Trade is a brokerage fintech company offering a comprehensive investment platform. They have commercial products for three PCs and two mobiles. E*Trade is a platform designed for high net worth users (over $100,000).
Fintech Model
E*Trade also uses a fintech model of investment. Areas of the company that implement price improvement at a high level use the "spray or sequential routing" method. It accesses many networks at the same time and is responsible for minimizing the probability of connecting to PFOF premium routes. 95% of all orders for S&P500 stocks can receive price improvement.
Key to success
Their Simple E*TRADE and Power E*TRADE apps have their own features. The first is an area suitable for casual use, while Power E*TRADE includes the necessary tools for investing in financial derivatives such as options and futures.
Moreover, it has become scarce to find good quality "paper trading" services recently. "Paper trading" is a simulator that simulates the real stock market, where investors can practice their trading skills and experience without taking real financial risks. E*Trade's E*TRADE Pro desktop application delivers up-to-date market data so users don't have to worry about actually trading. The simulator currently has over 500,000 fake trades per year.
Finally, E*TRADE Prebuilt Portfolios are available to choose from, designed to expedite the investment process for users. Choose from three risk portfolios: Conservative (low risk), Moderate (medium risk) and Aggressive (high risk) consisting of ETFs (security combining certain types of stocks) with a minimum of $2,500 and mutual funds with a minimum value of $500.
Source:
Official websites and LinkedIn pages
The Best Online Brokers for 2021: The Rise of the Individual Investor and Fintech Apps | Barron's
49 Top Fintech Companies & Startups To Know In 2021 | Built In
Investopedia’s 2020 Best Online Brokers Awards
Best Online Brokers (investopedia.com)
Interactive Brokers Review: Pros, Cons, and Who Should Open an Account (businessinsider.com)
Interactive Brokers Review 2021: Pros, Cons and How It Compares - NerdWallet