The online brokers were the first fintech product – even before the word ‘fintech’ acquired the current sense – to cause a disruptive effect on the brokerage service sector during the beginning of the ‘.com’ boom. Traditional brokers suffered an abrupt acceleration in the reduction of their commissions due to the arrival of these new agents, apart from the fact that traditional banks found in this kind of tool a way to prove they were keeping up with the technological revolution without compromising their main activity.
The rise in competition and the apparently easy access to the online broker technology changed the market conditions for brokerage services completely. This new panorama turned online brokers unprofitable for most financial intermediaries and this tendency has lasted for 20 years. Therefore, stock market transactions have almost become a commodity, but they incur high technological costs, and let us not forget that the platforms are quickly becoming old-fashioned. The outcome has been that many banks have conceived of the online broker as a necessary cost or, in the best-case scenario, as an eye-catching product. What is more, given the high technological and compliance costs, the main costs of an online broker are fixed ones while its variable costs are relatively low. With this situation we find ourselves at a crossroads when it comes to getting more profitability out of the online broker.
How to increase the profitability of your online broker
Fortunately, there is a win-win solution for brokers and their clients. Brokers can offer high quality value-added services that allow clients to have a greater understanding of their market activity and to clearly visualise their actual profitability, automate the protection of their invested capital or calculate, at any given time, the estimated capital gains that their investments should bring. The aim of these services that improve the global service for the client/investment is to ultimately boost transactions. Given the cost structure, the best way to achieve profitability is to help clients to intelligently invest in the stock markets, boosting their activity. What is more, these additional services can attract new clients, since what they offer is a component that will make it stand out from the competition.
The aim of these services that improve the global service for the client/investment is to ultimately boost transactions.
With minimum investments in add-on tools, it is possible to complement an already existing online broker and increase client activity significantly, achieving, in this way, the desired profitability for the online broker.