Why App-Based Stock Trading Remains Mostly Free Despite PFOF Ban

In recent years, the rise of neobrokers like Trade Republic and Scalable Capital has made stock trading accessible and affordable for millions, allowing users to buy stocks or manage ETF savings plans right from their couches.

Neobrokers typically charge only a nominal fee of one euro for stock orders or even offer them for free. In contrast, traditional banks can charge private investors between ten to twenty euros for order fees, while direct banks still impose fees of eight to ten euros. This low-cost trading model has thrived primarily due to a specific fee structure that has now been curtailed by the EU.

Since early July, the controversial practice known as "Payment for Order Flow" (PFOF) has been banned following a transitional period. This model allowed brokers to forward customer orders to private trading venues and market makers, who compensated them in return.

The previous arrangement was beneficial for brokers and exchanges alike. Neobrokers could offer trading at minimal or no cost while rapidly expanding their customer base. Smaller regional exchanges, such as those in Munich, Düsseldorf, or Hamburg, benefited from a consistent flow of orders.

However, the EU raised concerns about potential conflicts of interest, suspecting that brokers might prioritize orders to venues offering the highest rebates instead of those ensuring the best execution prices.

No Price Surge Expected

Industry estimates suggested that at some neobrokers, between 30% and 50% of revenue derived from PFOF. With this income stream eliminated, one might expect order costs to rise. Yet, this has not been the case. For instance, N26, a neobank, plans to discontinue its free securities trading by September, opting instead for a flat fee of 90 cents per trade while maintaining free savings plans. This move aligns more with the current industry standards.

As of early July, most neobrokers have identified alternative strategies to offset the loss of PFOF. Many continue to keep entry costs low for ETF and stock investors while shifting value creation inward. They are either taking control of trading themselves or finding new revenue streams.

Transitioning to Market Operators

Some providers are addressing the challenge by stepping into the role of market makers themselves. Previously, brokers forwarded customer orders to external trading venues, where a market maker, a trading firm that continuously quotes buy and sell prices, ensured liquidity.

Market makers earn from the spread, the small difference between buying and selling prices. Companies like Scalable Capital and Trade Republic are now assuming this role directly.

Scalable has pioneered a model where it has taken on significant portions of the value chain—from account management to trading, clearing, settlement, and custody—culminating in the creation of its own trading venue, the European Investor Exchange (EIX). Launched in late 2024 in collaboration with the Hannover Stock Exchange, Scalable now acts as a market maker there, earning through the spread rather than external payments. For customers, visible pricing remains unchanged, and savings plans continue to be free.

Trade Republic has followed a similar path, receiving authorization from BaFin in early 2026 to operate a multilateral trading facility (MTF), a regulated, privately-operated trading venue that coexists with traditional exchanges like Xetra. As of July, Trade Republic has launched a new trading technology that enables customers to trade at the best available prices across relevant exchanges. Orders are now matched internally rather than through external venues.

Customers can buy at the lowest prices and sell at the highest. The cost remains at one euro per trade for best-price execution, but users can also choose from about 30 exchanges, including Xetra, Euronext, and Nasdaq, with a fee of two euros per trade for this option.

Scalable is also adjusting its fees for executions across different trading venues. Trading on Xetra is now significantly cheaper, dropping from approximately 5.49 euros to a flat fee of 1.99 euros, while trading on gettex has increased from 0.99 to 1.99 euros. However, trading on EIX remains at 99 cents, and in the Prime+ subscription (4.99 euros per month), it is free for orders over 250 euros.

The rationale behind this pricing strategy is clear: by increasing fees on alternative venues, Scalable aims to drive more order volume to its own exchange, where it can profit from the spread.

Stock Trading as a Gateway

Another method to keep stock trading affordable is through cross-subsidization from other services. Major neobrokers have diversified their offerings beyond stock trading and savings plans, now providing checking accounts, card programs, interest on deposits, and loans.

For example, Trade Republic has expanded into cryptocurrency trading and investments in private markets via ELTIFs. Its former settlement account has evolved into an interest-bearing checking account, and the company issues a debit card, earning from interchange fees and the interest margin on customer deposits.

Similarly, Scalable Capital offers interest on deposits and has introduced subscription models for frequent traders. The broker also profits from its proprietary global ETF, provides a robo-advisor, and offers securities loans. Recently, it expanded its offerings for experienced investors, allowing trading of over 1.8 million derivatives, financial products enabling speculation on rising or falling prices.

As a result, neobrokers are increasingly transforming into comprehensive digital platforms for saving and investing, catering to various customer segments. For these diversified business models, PFOF is no longer crucial for financing attractive entry offers for new customers.

A New Kind of Bonus

However, not all providers can establish their own trading infrastructure or venture into banking. Platforms like Traders Place or finanzen.net zero continue to operate on a model that maintains low fees through a type of bonus system. Unlike PFOF, which previously benefited brokers, these rebates are now credited directly to customers.

For instance, finanzen.net zero has restructured its model so that customers incur no new order fees. While a placement fee will now be charged, it will be offset by different bonuses from partners or by waiving fees from the settlement partner. Whether regulatory bodies like the European Securities and Markets Authority (ESMA) will scrutinize this new form of bonus remains to be seen.

Smartbroker+ is adopting a different approach, aiming to offset the loss of PFOF revenues through reduced operational costs. Cost savings and the exploration of new revenue sources are intended to compensate for the decline in income while keeping customer conditions stable. Like many neobrokers, the company is also focusing on additional business through a planned retirement savings account set to launch in early 2027. Additionally, since May 2026, it has provided access for professional users through programming interfaces and crypto index products.

Customers Need to Pay Attention

While the PFOF ban was intended to enhance transparency for customers, the actual offerings from neobrokers may not be any clearer. Although the anticipated fee increases have not materialized, investors should pay closer attention to where costs arise and which fee structures best suit their needs. It’s important to note that order fees are not the only factor; costs can also accrue through the spread and execution price, depending on the exchange used and the timing of trades.