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The bull chasing the bandit: Webull takes on Robinhood

Written by AJ Cortese Published on     4 mins read

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Chinese-owned B2C digital brokerage Webull’s proactive government relations, combined with a low-key marketing strategy, has allowed the company to gain traction in the US.

As pandemic lockdowns gave people a chance to explore new hobbies and interests in their free time, many in the US turned to investing, in part drawn to the buzz of popular big gainers in 2020 like Tesla, Zoom, Amazon, and a host of pharmaceutical firms.

In the first quarter of 2020, major brokerages like Charles Schwab, TD Ameritrade, and E-Trade saw the number of new accounts double from the same period in 2019. However, many users from the younger, digitally native generation ended up flocking to Robinhood.

The Silicon Valley-based company that pioneered mobile-based, zero-charge trading added over 3 million users in early 2020, but has encountered a slew of challenges. Besides pressure from regulators to make their app less like a video game and more like a professional financial tool, Robinhood has also suffered from service outages and lackluster customer service, providing an opportunity for other players.

Webull, which is headquartered in New York in the heart of Wall Street and presents a more sophisticated and serious product to users, has gained a significant foothold in the US retail trading market. It competes against the likes of other no-fee investment platforms, including sector leader Robinhood, M1 Finance, and Public.

Up against cash-rich, would-be competitors in the finance industry, Webull has maintained a low profile since its launch in 2017. Its marketing strategy takes a page out of the playbook of many Chinese platforms—the platform uses low-cost, authentic, KOL-powered campaigns to lure users.

Robinhood’s launch in 2013 predates Webull and provided vital market education for novice investors who were new to commission-free trading. In the years spent on Robinhood, some beginner investors have built up their knowledge, while the company’s strategy of aggressive user acquisition has led the firm to cater its features to beginners instead of its existing user base.

Webull provides the next step in zero-fee, amateur trading platforms, with a more professional and data-heavy approach to trading that seasoned investors are after. This includes in-depth charts and technical indicators that are nowhere to be found on Robinhood. Webull also supports a desktop version—which makes multiscreen viewing possible—while Robinhood is entirely mobile-based.

More than 3 million people joined Robinhood in 2020, per the company’s annual recap, while the median age of Robinhood investors is just 31 years old. Photo source: MayoFi on Unsplash.

Webull also differentiates itself through its live customer service during US trading hours, while Robinhood’s customer service functions through email, and takes 24 to 72 hours to respond to requests and complaints.

This distinction matters. Investors panicked when Robinhood experienced widespread outages in March and April in 2020, with no way to immediately get in touch with the company. Those occurrences at a time of high market volatility prompted a probe from the US Securities and Exchange Commission (SEC). The investigation is still ongoing.

Webull’s user base has grown tenfold in 2020 to over 2 million, still paling in comparison with Robinhood’s user base of around 13 million, but Webull is gaining ground.

Although Robinhood points to a 260% year-on-year increase in visits to its app, the SEC charged the company with misleading investors about the platform’s order execution quality, forcing the company to settle the suit by paying a fine of USD 65 million. And in December, Massachusetts securities regulators lodged their own complaint against Robinhood, claiming the app exposed investors to “unnecessary trading risks” through its “gamification” of investing.

Webull has successfully distanced itself from Robinhood’s animated, attention-grabbing user interface.

Webull launched its desktop platform in June 2019. Image from Webull’s Twitter feed.

Flying under the regulatory radar

Despite harsh scrutiny from the Trump administration toward Chinese-owned companies accessing US user data, Webull has largely flown under the radar. And that is no accident.

In 2020, the company proactively requested a review from the Committee on Foreign Investment in the United States, or CFIUS. After gathering materials from the company, the committee ruled in December that it would not proceed with a formal review, despite Webull’s ownership ties to Alibaba.

“The Trump administration has unjustifiably talked about Alibaba as a military-linked company—but it is not undertaking a CFIUS review of an Alibaba unit holding financial data of Americans? There’s an inconsistency there,” said Derek Scissors, a resident scholar at the American Enterprise Institute.

While CFIUS is broadcasting mixed messages on companies of Chinese ownership handling American user data, Webull has found an opportunity to grow as Robinhood encounters regulatory hurdles. And the window isn’t closing anytime soon.

“An incoming Biden team will largely focus on its domestic agenda in the early months of the new administration, with China-related topics likely pushed down the line,” said Scissors.

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A shining example of data compliance?

Perhaps CFIUS’s decision not to proceed with a review in December was because Webull proved to be a shining example of data compliance. If that was the case, CFIUS should have initiated a review to then extol Webull as an example for other foreign-owned companies to follow, argues Scissors.

The company stores its data locally, a move that ByteDance-owned TikTok was pressured into making in Europe, India, and the US. However, this act does not exempt the firm from a CFIUS review of the firm’s data compliance practices.

Instead, it seems that Webull’s low-key profile continues to pay dividends in more ways than one. Webull casts itself as a more mature, more stable counterpart to Robinhood: The gamification strategy deployed by Robinhood is causing the Silicon Valley-based firm plenty of headaches. Robinhood traders executed 40 times as many trades and bought and sold 88 times as many high-risk options as Charles Schwab customers, per a report from research firm Alphacution.

Meanwhile, Webull continues to gain momentum, launching Webull Crypto in November 2020 and a tablet version soon after. As Robinhood continues to contend with the perils of its novice-centric app, Webull’s no-frills approach with greater depth of information has enabled the platform to carve out an increasingly large market share in the app-based trading game. 

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