The Webull Business Model: How does Webull make money?

Are you curious about how does Webull make money?

In 2017, a little-known trading platform called Webull Financial LLC began to gain exposure for its products and services. Soon after, Webull gained popularity amongst retail investors and became one of the top-rated stock trading apps among online brokers garnering over 2 million downloads. 

Webull is popular with new investors because they offer a free stock for getting started with a trading account also offers free stocks for referrals. In the past, investors were used to paying commissions to brokers when trading stocks. However, Webull allows its users to invest in the stock market without paying commissions. Let’s explore the business model of Webull and how Webull makes money. 

Webull: Company Profile

What is Webull?

Webull is one of the top apps in the finance category. It was founded in 2017 and has quickly grown to 2M+ downloads. Webull is a mobile stock trading platform that provides commission-free trades with no minimum deposit needed.

Not only that, but Webull also offers free real-time data for stocks, Exchange Traded Funds (ETFs), options, and cryptocurrencies in the US, Canada, and Hong Kong markets.

How does Webull work?

Webull is one of the most popular apps for millennial investors. But what makes this trading platform stand out is they offer commission-free trades along with premium features usually found in paid online brokerages.

They also offer tools to help traders analyze market trends and gain insights to manage their portfolios. Additionally, they offer extended trading hours, giving users access to the markets outside regular trading hours.

Webull also allows you to trade from a Roth IRA account. You can also deposit cash to Webull with no minimum deposit requirement. Once you have deposited money into Webull, you are free to trade stocks commission-free with no minimum account balance.

Conveniently, Webull has a Web version, a Desktop app that works on Windows, Mac, Linux, and a mobile app.

Who owns Webull?

The company is owned by Fumi Technology, a Chinese holding company. It has attracted funding from top private equity investors in China, such as Xiaomi, Shunwei Capital, and other private equity investors.

How was Webull started?

Webull is based in New York City. It was launched in 2017 and was founded in 2016 by Wang Anquan, an alum of the Alibaba group. 

Anquan started his career in various technology roles, including Alibaba, before founding Webull. Webull was launched with a seed round of capital from Xiaomi and Shunwei Capital, a Chinese private equity fund focusing on early-stage consumer tech companies.

In 2006, Anquan started working for Alibaba and served as technical director of Taobao’s loan division. He was the assistant to the president of Alibaba Financial from 2006 to 2012.

He then joined as president of the Department of Online Financial Asset Transactions at HengFeng Bank in 2014. He joined Xiaomi as general manager of the finance division a year later.

In 2016, Wang set up Webull’s parent company, Fumi Technology. Webull was then launched in 2017 with a seed round of capital from Xiaomi and Shunwei Capital, a Chinese private equity fund focusing on early-stage consumer tech companies.

Webull is headquartered in New York City and has hired Anthony Denier, a wall street veteran, as the CEO of Webull. Denier has more than two decades of experience on wall street with a successful track record in finance and asset management. 

Webull’s focus is an easy-to-use platform with sophisticated technology that allows you to make intelligent investment decisions. Webull serves a new generation of fintech investors, and they believe that their focus on easy-to-use, high technology, and mobile applications is the key to their success.

Webull’s growth

At the time Webull started, Robinhood was one of its strongest competitors. Webull’s goal is to not only compete with Robinhood but become the leader of commission-free trading.

Webull has been growing at a rapid pace since its launch in 2017. Webull aims to be transparent, secure, and compliant and has quickly grown into a popular platform with 2 million+ downloads and dedicated users.

The financing from Xiaomi and Shunwei Capital has helped them scale the business in the North American market.

Webull is also an easy platform to navigate, so if you are looking for in-depth analysis and a new mobile trading experience, this might be the right platform for you.

It offers more than just stocks; it offers cryptocurrencies and news that will keep you on top of the market trends.

Webull differentiates itself through its stellar customer service, going above and beyond when it comes to live customer support during US trading hours.

Robinhood’s customer service is known to be less than adequate, functioning through email and taking 24 to 72 hours to respond, so this is a huge plus to Webull.

Webull has marketed itself well through its features and influencer marketing campaign. The company has reached out to a group of successful influencers and YouTube stars, offering them exclusive commissions for sharing their platform with their audience.

They also offer a free stock for signing up with their platform and investing a certain amount of money.

Retail investors love Webull’s easy-to-use platform and customer service. Webull appeals to the millennial generation with their investor-friendly features, low fees, and customer service, where they are available during trading hours to help you set up your account.

Webull’s Statistics

Webull’s funding: Webull has raised a total of $206 million in 5 funding rounds. The company raised $150 million in its latest funding round in February 2021, led by Gopher Asset Management. Investors in Webull include Xiaomi, Shunwei Capital Management, Divine Capital, Mobai Capital, and other investors. 

Webull’s valuation: Webull has a valuation of $1 billion.

Webull’s users: Webull has more than 2 million downloads and users.

Webull’s employees: Webull has more than 150 employees.

Webull’s competitors: Webull’s main competitor is Robinhood, but they also face competition from E*Trade, TD Ameritrade and Charles Schwab.

Webull’s revenue: Webull is not a publicly-traded company, so they don’t have to make their revenue numbers public. The company is growing quickly with a $1 billion valuation, so we can assume they are profitable. 

How does Webull make money?

Webull’s revenue streams include payments on order flow, margin fees, interest on cash holdings, subscription fees for premium services and investment products, short-seller fees, and other fees.

Payments on order flow

Webull directs your order flow to particular market makers that provide the best price for your transaction when you place a buy or sell order. These are high-frequency trading firms that make money on the bid-ask spread.

A bid is the highest price that someone is willing to pay for an asset, and the ask is the lowest price that someone will sell at. The spread between the bid and ask is the payment that market makers make for providing this service.

These payments from market makers when they execute your orders are called payments on order flow. Webull earns a fraction of a cent when it directs your order to a market maker for every trade. Although this may seem little, it can add up with a high volume of transactions. The more volume that Webull handles, the higher fees they can charge market makers for order flow and the closer they get to profitability.

Margin fees

Webull can lend you money to buy the stock when you don’t have the cash in your account. Webull allows you to borrow money so you can trade more than you might be able to afford per stock or cryptocurrency position; this is known as margin trading. They charge a small fee for doing so.

For example, if you had $1,000 in your account and wanted to borrow another $1,000 from Webull to buy a stock that costs $2,000 total, they would charge you a margin fee of around 3.99%. If you use this strategy frequently, you should be aware of these fees.

Margin interest is how most commission-free trading platforms make money and is very effective for them because it does not directly affect the client until they place an order, so many investors do not even notice that there is a charge associated with these transactions.

When investors use margin the way it is intended, they are simply borrowing money to trade more stock than they can afford. However, if investors use margin incorrectly, they can see their loss grow significantly because of the additional interest they have to pay for the loan.

Interest on cash holdings

Investors who have a brokerage account generally have cash sitting in it. This creates a pool of money that the brokerage company can lend to other investors. Some brokerages will pay interest on these accounts to attract investors rather than have investors place their money into a savings account. Webull will pool this cash and invest it. The longer you keep money in your account, the more Webull can make off that idle cash.

Some brokers may pay you interest on your cash holdings. However, the downside is they may charge you commissions and fees to trade.

Short selling fees

If you short a stock, it means you’re borrowing shares to sell with the hopes that they will go down in value so you can repurchase them at a lower price and return them to their owner. Webull charges a small fee for short selling. 

Other fees

Webull charges other miscellaneous trading-related fees. If you’re transferring funds out of your Webull account, there’s a $75 fee for that. This transfer fee is charged by APEX, the company that provides merchant transfer services to Webull.

Although Webull doesn’t charge you for incoming transfers, you have to pay the broker from which you’re transferring money. This fee differs depending on the broker. 

Subscription fees for premium services and investment products

Webull offers paid subscriptions to traders who wish to get access to global market data. Data for US markets is free, but a monthly subscription fee is required to access data from outside the United States.

Subscription fees are also required to access more granular market data, margin trading, and premium charting tools.

Final Thoughts

Webull is an excellent investment platform that offers investors the opportunity to trade commission-free, which is beneficial for those looking to build a long-term portfolio. 

Even though you’re still responsible for some fees, Webull makes up for this by not charging commissions on stock transactions. This gives their platform an edge over other trading apps that charge a commission.

While there are no minimum balance requirements or account fees associated with Webull, they make money by selling your orders to market makers and lending you money for margin trading purposes.

This may end up costing you more than expected if you’re not aware of all the ways they generate revenue. Market volatility and all other risks associated with securities trading and investing may still apply.

Keep this in mind before choosing Webull as your trading platform. Investing is risky, and the value of your portfolio can go up or down, so always do your due diligence before investing. We hope this article has given you some insights about Webull and how does Webull make money.

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