The neobroker industry is experiencing a period of rapid growth. According to StockApps.com, assets under management (AUM) for neobrokers is projected to rise 46% by 2027, reaching $600 billion U.S. dollars. This growth is expected to be primarily driven by increased user penetration and engagement due to the increasing popularity of digital banking solutions. The number of neobroker users worldwide has also been steadily rising, reaching a total of 66 million users in 2022.
StockApps financial analyst Edith Reads commented on the data saying, “Younger and more tech-savvy users prefer neobrokers as their choice for digital banking due to their low fees, comprehensive financial planning features, and user-friendly interfaces. They are well-positioned to capitalize on the current trend towards digital banking.
Neobroker revenue has also seen significant growth, with estimates hitting 2.85 billion revenue U.S. dollars in 2022. This rapid rise is due to an increasing number of investors utilizing neobrokers for a variety of investment needs.
The increasing popularity of neobrokers is evident in their current penetration rate, which stands at 0.9 percent in 2022. This is expected to rise further as more and more customers opt for the convenience and flexibility offered by these digital platforms.
Top Companies in this Industry?
Neobrokers are fully independent, yet many partner with traditional banks to build efficiency, offer complementary services and grow their investor base. As of 2022, Robinhood had 11.4 million monthly active users and reported assets under management (AuM) worth over 60 billion U.S. dollars.
In the same year, eToro had over 31 million registered users. Additionally, as of February 2023, The WeBull app had been downloaded over 22 million times.
The shift towards neo-brokerage firms is due to the convenience they offer consumers in terms of low-cost investments and easy access to financial markets from anywhere at any time. However, there are some challenges that neobrokers will need to overcome in order to continue their impressive growth trajectory into the future.
These include regulatory issues such as KYC/AML compliance and consumer protection regulations, which can be costly for neobrokers to comply with but necessary for them to remain competitive in the market.
There is also a need for improved customer service capabilities and better educational resources on investing topics so consumers can make informed decisions about their investments without feeling overwhelmed or intimidated by complex financial jargon or concepts.
The global expansion of neobrokers into new markets will also require significant investment in infrastructure and customer acquisition strategies and the ability to stay ahead of technological changes and customer demand.