Europe’s fastest-growing online stockbroker targets reduced trading costs here
Degiro founder Gijs Nagel outlines how the company’s low-cost trading offering can bring big benefits to the Irish trading landscape
Gijs Nagel: 'Traditional broker systems are so inefficient that they can’t make it profitable to deal with clients with smaller assets. They are pulling out of this market. This is a move you see happening all over Europe'
Founded in the Netherlands in 2008, Degiro is Europe’s fastest growing online stockbroker. It is already the largest online broker in its home market, commanding a 40 per cent share. It is now number seven in Europe and climbing with 150,000 active clients carrying out almost 10 million transactions annually worth in excess of €30 billion on more than 60 exchanges across Europe, North America, Asia, Oceania and around the world.
The secret to the company’s success can be boiled down to speed, simplicity and – most of all – cost, says its founder and CCO Gijs Nagel.
Degiro’s fees for trading in shares and other financial instruments are just a fraction of those charged by competitors. For example, an Irish person purchasing €1,000 worth of Bank of Ireland shares on degiro.ie will pay just €2.40 in trading fees as opposed to an average of €49.17 with Irish brokers. That’s a saving of 95 per cent. The difference is even more dramatic when it comes to US shares. An Irish person buying €5,000 worth of Google shares with Degiro would pay just 52 cent in fees as opposed to an average of €117.08 with Irish stockbrokers.
Better yet, there are no fees whatsoever on investments on over 700 exchange traded funds (ETFs) which track stock market and other indexes around the world. Furthermore, Degiro is about to introduce free investing in popular funds for Irish clients. This move follows on from RaboDirect’s withdrawal from the investment services market in Ireland.
Our mission is to lower prices. Ireland is one of the most expensive countries in the EU to trade
These low prices, combined with a secure, reliable and innovative trading platform, have resulted in rapid growth for the company which opened for business in Ireland 18 months ago and already has several thousand customers here.
“Our mission is to lower prices,” says Nagel. “Ireland is one of the most expensive countries in the EU to trade. Our fees and charges are typically 80 per cent lower than those of competitors but in Ireland it is over 90 per cent. Also, by offering free investing in popular funds we want to show Irish investors that paying too much for such services is unnecessary.”
These low costs are the result of both innovative use of technology and a business model which takes advantage of the EU single market in financial services. The Markets in Financial Instruments Directive (MiFID) came into force in 2007 and effectively harmonised the rules for investment firms and stock exchanges across Europe and allows firms like Degiro to be regulated in one EU member state and to offer services to customers in every other member state.
It was no coincidence that Degiro was founded the following year. “We see Europe as one big international market,” says Nagel. “MiFID in 2007 made this possible. We set up in 2008 to provide a service to institutional investors and began offering the same service with the same low fees to retail investors in markets across Europe in 2013. We were the first broker to do this. People were fed up with paying high fees and the industry was pushing them away. Traditional broker systems are so inefficient that they can’t make it profitable to deal with clients with smaller assets. They are pulling out of this market. This is a move you see happening all over Europe.”
If you get the scale right you can get your prices down to a level that no one else can match
Degiro’s business model allows it to serve retail clients profitably and vastly reduce fee levels. Thanks to its innovative use of technology the company employs just 160 people in its Amsterdam and Sofia offices to service clients in 18 countries. “Our success is built on our scale,” Nagel explains. “If you get the scale right you can get your prices down to a level that no one else can match. With the benefits of scale you can offer better products and use profits to invest in better client services. At a certain point it becomes impossible for competitors to fight back.”
All of the software for the company’s very user-friendly web trading system is developed in-house. This keeps costs down and also makes the company very agile when it comes to responding to changing customer and market demands.
“We could be described as being a fintech company,” Nagel explains. “We are an IT-driven company and all of our processes are designed to be as automated as possible. Of the five founders of the company three were programmers.”
Becoming a Degiro client is simple and involves absolutely no paperwork. Degiro uses bank-derived identification so the account can be viewed as an extension of one bank account and the company will only transfer money to that account. In effect, this means that the checks a client’s bank has already carried out to verify their identity and bona fides are also used by Degiro, greatly speeding up the process.
“In most countries it takes just 10 minutes to sign up with us and start trading,” says Nagel. “In Ireland it takes two days before a client can start trading but we are working to speed this up.”
And making that first trade could hardly be simpler. The client just logs into their account on the Web Trader platform on Degiro.ie and searches for the product they wish to trade in. That might be the name of a company they want to buy shares in, for example. They then either select a price they wish to pay for the shares or specify the number of shares they wish to buy and place their order. The order will be executed as soon as any price conditions have been fulfilled and when the relevant market opens.
“Our Web Trader platform has received great reviews,” says Nagel. “It is very easy to use and because it is developed internally we can make changes very quickly. Clients can also request new products they would like to see added to the platform. For example, we found there was high demand for CFD trading in Ireland and we were able to add this very quickly.”
Once they start trading clients can keep track of their investment portfolio and their account balance online at any time they wish. They can see if their shares have gone up or down in value, can sell them and take profits, buy more or explore other products they might be interested in – all at either very low cost or no cost at all.
For more see www.degiro.ie