Brazil's XP Joins No-Fee Trading Craze as Rivals Race to Bottom

Brazilian financial services platform XP Inc (XP.O) said on Monday that it is ending brokerage fees for stocks trading on its online platform, Rico, which is focused on stock transactions, the futures market, direct treasury and funds distribution.

In addition to Rico, the listed brokerage is slashing 75 percent off fees that it charges on XP Direct (B2C) for the same type of trades, according to a statement today.

XP’s founder and CEO, Guilherme Benchimol said that the commission cuts would cost the company as much as $6 million in quarterly revenue. This figure is the equivalent to about 2 percent of total gross revenue based on Rico and XP Direct online equity trade revenues in the first half of 2020.

However, Mr. Constantino expects the initiative will drive higher net inflows, AUC and cross selling opportunities across the platform to grow other revenues.

“The Brazilian retail investor, with less than R$3 million, maintains around a 3% allocation to Equities Equities Equities can be characterized as stocks or shares in a company that investors can buy or sell. When you buy a stock, you are in essence buying an equity, becoming a partial owner of shares in a specific company or fund.However, equities do not pay a fixed interest rate, and as such are not considered guaranteed income. As such, equity markets are often associated with risk.When a company issues bonds, it’s taking loans from buyers. When a company offers shares, on the other hand, it’s selling pa Equities can be characterized as stocks or shares in a company that investors can buy or sell. When you buy a stock, you are in essence buying an equity, becoming a partial owner of shares in a specific company or fund.However, equities do not pay a fixed interest rate, and as such are not considered guaranteed income. As such, equity markets are often associated with risk.When a company issues bonds, it’s taking loans from buyers. When a company offers shares, on the other hand, it’s selling pa Read this Term, which is very low. We believe that the ongoing equitization process in Brazil will accelerate and that number of individuals in the stock market could surpass 10 million in the next two to three years,” he further explains.

Fees War Escalates

The no-fee offering is likely to boost competition in Brazil’s highly concentrated brokerage sector, in which the country’s top five banks hold more than eighty of total assets.

Founded in 2001 as a financial advisor, XP has been challenging Brazil’s traditional banks. The company had a total revenue of $304 million in the second quarter through June, while its net income was reported at $104.6 million. Further, according to its filing, it has more than 1.5 million clients and $84 billion in assets under custody.

In December 2019, XP debuted its Nasdaq listing at $27 per share in the largest IPO of a Brazilian company, raising $2.25 billion, which valued the company at $14.9 billion.

Online stock trading has become much more competitive since Fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term firms like Robinhood have emerged to meet the growing demand for cheaper or entirely free investment products.

“We strongly believe that the long-term benefits to our ecosystem related to the reduction in fees will more than offset short-term financial impacts. As we saw when we successfully eliminated brokerage fees at Clear, we expect ongoing growing in Active Clients, their engagement and satisfaction and, consequently, a lower client acquisition cost,” added Benchimol.