#1 Democratising access to global share markets with $0 commission trading on Stake
The Commsec killer?
Kicking off our series with a deep dive into a fast growing digital brokerage making waves in the share trading space, this week we look at Sydney-native Stake and their recent $AU 40 million series A funding led by VC behemoths Tiger Global and DST Global. Notable investments previously made by these players include the likes of Facebook, Spotify, Doordash and Square. So what’s all the hype about?
The Market
When you think of share trading, you probably imagine a scene from The Big Short with a bunch of suited guys on Wall St sitting at 5 monitor desks staring at numbers and charts. However, this couldn’t be too far from the truth today. With continuing market and infrastructure developments that have made share trading more accessible to retail ‘Mom and dad’ investors like you and me, it’s more common now than ever for fresh high school grads to celebrate their 18th birthdays by opening up a share trading account to buy Tesla stock.
And it seems like this trend won’t stop anytime soon and has even accelerated in our current COVID-19 climate.
According to Finder’s 2021 report, almost half of all Australians (49%) now own shares. Given our particularly difficult times currently characterised by high levels of unemployment and record-low interest rates, it’s clear that people have a growing need to make money elsewhere.
However, before even thinking about trading a stock, you need a brokerage account.
The Business Model
The staple of any stock brokerage helps you do one thing: buy and sell shares and ETFs (or exchange traded funds) on the global share markets. And traditionally, brokers mainly made money from providing this service by charging you brokerage fees.
These are fees (that can be flat or a % of your order value) charged each time you buy or sell a stock/ETF. These fees also notably become more expensive when trading from Australia on overseas markets like the U.S. Thus, put simply, the industry was a volume based game: the more trading activity you had on your platform, the more money you’d make.
In addition, the actual process of opening up an international trading account from Australia to trade on the U.S was quite complex, with steps on how to complete key forms being unclear and confusing.
The Opportunity
Founded in 2017, Stake sought to disrupt the global brokerage industry by pioneering a $0 brokerage fee model for customers trading on the U.S stock markets, a trend first made prominent by U.S brokerage Robinhood back in 2013.
Stake made money a different way: Charging a foreign exchange conversion fee on AUD to USD conversions. As Australian traders would first be required to convert their local AUD currency into USD before trading on the U.S markets, Stake takes a small portion of the converted USD amount without any additional fees being charged. This pricing structure is similar to your usual FX remittance or exchanges at the airport.
Additionally, the company automated and filled out the required documentation to trade on the U.S markets on behalf of customers to create a seamless experience.
The Game Plan
Since exponentially growing its customer base to over 330,000 customers across 4 different countries, Stake has major ambitions to continue its growth and expand its sources of revenue.
- Firstly, it’s released a premium account type ‘Stake Black’ that provides users with additional benefits like instant buying power and access to analyst data, in exchange for a monthly/yearly subscription (like your monthly Spotify or Netflix subscription)
2. Secondly, Stake has also ventured into the self-managed super space, looking to make fees from creating and manage self-managed super funds originated on their platform.
3. Thirdly, the company has also announced its entry into the local ASX market, undercutting industry incumbents with their $3 flat-fee brokerage.
