Berlin-based neobroker Trade Republic has been granted a full banking licence from the European Central Bank.
The new licence means the fintech can hold customer deposits and also create a lending business.
Previously, the fintech worked with banking partners Solaris AE, Deutsche Bank AG, JP Morgan SE and Citibank Europe plc to handle customer funds, according to its website.
Trade Republic was last valued at $5.3bn when it raised one of Germany’s biggest-ever rounds in 2021, from international VC heavyweights including Sequoia, Accel, TCV and Peter Thiel’s Founders Fund. The fintech says it has more than 2m customers across 17 European countries.
Currently, it provides trading and savings products, including commission-free trading for retail investors, and a monthly ETF savings plan through its partnership with BlackRock. It also introduced bond trading to its app in 2023.
Until now, Trade Republic operated with a “CRR investment firm” licence, a specific licence granted by German regulators to trading platforms. But on stage at the Slush tech conference in Helsinki last week, cofounder Christian Hecker said that the reason the fintech had been able to raise so much from investors was because it had “built a strong muscle” for working with regulators and had already obtained a banking licence.
“You can grow to a $1bn company with the help of investors, but you can only grow to a $10bn company with permission from politicians,” Hecker said, adding that some US financial companies had failed to conquer Europe due to regulatory hurdles.
“If you’d told me at the beginning that it would take four years to get a banking licence, I would never do it again,” Hecker continued, admitting that the company has a “love-hate relationship” with the German regulator BaFin.
Hecker also said that the fintech had built its entire banking infrastructure in-house, rather than relying on a separate banking software partner.
Payment for order flow
Now that Trade Republic has obtained a full banking licence, it will be able to diversify its revenue streams and make money off customer deposits.
This could soon prove essential in the face of a planned EU ban on a controversial trading mechanism called payment for order flow (PFOF) — what enabled buzzy trading platforms like Trade Republic and Robinhood to lure in customers with commission-free trading. Instead of charging fees to consumers, they use PFOF to take rebates for forwarding customer orders to large market makers, like Citadel Securities.
This mechanism represents a third of the fintech’s revenues, Hecker said on stage at Slush last week. He also told the audience that he’d travelled to Brussels several times in the last year to lobby against the ban, which is planned to come into force in 2026.