Robinhood and other Fintech firms are using Social Media-based principles and tools such as “gamification” software to drive customer growth and usage. Legacy Asset Managers are taking the M&A route.
Order Flow Revenue or “Pay-to-Play Revenue” is the revenue that Asset Managers generate from directing equity and options order flow to various trade execution firms (The firm that executed the trade may have been the highest bidder, not necessarily the firm that offered the best trade execution price). Order Flow Revenue has been the fastest growing revenue line item for Asset Managers during the Equity Bubble.
Equity and options trading volume among retail investors has spiked in 2020 given the Equity valuation bubble. As a result, Asset Managers such as Charles Schwab (tkr: SCHW) have enjoyed year-over-year Order Flow Revenue growth of approximately 100% year-to-date.
How will Asset Managers keep the Order Flow Revenue gravy train running? The answer is to maximize the number of customer accounts.
- Morgan Stanley (tkr: MS), Charles Schwab and other legacy Asset Managers have pursued the M&A route.
- Robinhood (private) and other Fintech firms leverage techniques such as gamification embedded in their mobile apps. Learn more about gamification software HERE.