Earlier this year, Trading 212 introduced interest payments on uninvested funds, but a clause initially allowed the broker to withhold interest from inactive clients. The company has now removed this limitation, benefiting passive investors.
Changes to Interest Payments for Passive Investors
Retail brokers and CFD firms have increasingly started offering interest on idle client funds as a way to cater to savers and passive investors. London-based Trading 212 joined this trend in May by offering interest on uninvested cash, encouraging its clients to keep funds in their accounts.
However, the original terms included a provision that gave the broker the right to suspend interest payments for clients who were not actively trading. This clause has now been removed in an update to the company’s terms, allowing even inactive clients to benefit from interest on their funds.
High Interest Rates Prompt Shift in Investment Strategies
In response to rising interest rates, many investors are opting for safer strategies, such as keeping their funds in accounts that earn interest. To accommodate this shift, brokers like XTB, BidX, and Webull have introduced interest on uninvested funds, with offers ranging up to 5%. Trading 212 followed suit by offering up to 5.2% interest on idle cash, in addition to launching a multi-currency payment card.
Initially, Trading 212’s terms allowed the company to halt interest payments to inactive accounts to ensure compliance with its regulatory permissions. However, the September update to the Invest terms, first reported by Investing in the Web, removed this restriction, ensuring that clients who are not actively trading will still receive interest on their uninvested funds starting October 4, 2024.
CEO Comments on the Updated Terms
Responding to questions from Finance Magnates, Mukid Chowdhury, CEO of Trading 212, explained the reasoning behind the update: “The removal of the clause regarding interest suspension reflects our commitment to simplifying our terms and providing greater transparency for our clients. We are focused on ensuring that our terms are clear and beneficial, contributing to a more customer-centric experience.”
Expansion and Strategic Moves
Trading 212 has been busy expanding its reach and services in recent months. In August, the broker acquired FXFlat Bank GmbH to enter the German market, offering commission-free trading to German investors. This acquisition is part of a broader strategy to disrupt traditional brokerage models across the UK and Europe.
Additionally, in June, the company obtained a cryptocurrency license in Cyprus, allowing it to offer crypto asset services through a newly created entity, Trading 212 Crypto Ltd. This follows its efforts to expand its presence in the growing crypto market.
Despite these advancements, Trading 212 faced a challenging year financially. The company’s 2023 report revealed a 3% decline in revenue and a significant 28% drop in pre-tax profits. Administrative costs surged by 45% due to increased marketing efforts and a renewed focus on research and development.
