When it comes to buy now, pay later (BNPL), Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) are fierce rivals. And fair enough too. The burgeoning BNPL space is both growing fast and becoming increasingly crowded. That's a recipe for tough and fierce competition in true capitalistic style.
But apparently that's where the rivalry ends. According to reporting in the Australian Financial Review, Afterpay co-founder Nick Molnar and Zip co-founder Larry Diamond are teaming up to invest in a new 'Robinhood-style' share trading app that will be available for Aussie investors very soon.
The app is known as 'Superhero' and will charge a flat fee of $5 per ASX trade, with minimum investments of $100.
Superhero is aiming to challenge the existing established brokers like Commonwealth Bank of Australia's (ASX: CBA) CommSec platform, which currently offers a minimum trade value of $500 and a minimum brokerage cost of $10 for an investment up to $1,000, with brokerage of $19.95 applying to all trades with a value between $1,000 and $10,000.
According to the AFR, Superhero has been '2 years in the making' and has just completed an $8 million capital raise. This was led by Mr Diamond and with Mr Molnar as well as Zip chair Philip Crutchfield. Mr Crutchfield is set to become chair of Superhero.
"We're making investing accessible to the younger generation," another investor John Winters told the AFR. "There are a lot who feel locked out of the market. So they're going to the high-cost incumbents but they don't really have to anymore."
What is Robinhood and the 'Robinhood effect'?
Already investors are comparing this new superhero app to the uber-popular Robinhood platform in the United States. Robinhood is a private US company that was started back in 2013. It is known for pioneering the 'zero brokerage' model for American investors.
The company is credited with 'forcing' all major US brokerages to move to a zero brokerage model. In doing so, Robinhood is credited by many for bringing investing to a younger generation. Millennials and Gen Z investors form the lion's share of Robinhood's customer base and have been making quite a stir in 2020.
The massive share market crash (and following recovery) that both ASX and US investors went through back in March and April prompted massive increases in new Robinhood accounts and short-term trading activities. It's these trends that are often credited with the massive moves we have seen in US stocks like Apple Inc. (NASDAQ: AAPL), Tesla Inc (NASDAQ: TSLA) as well as ASX shares like Afterpay and Zip.
These activities from younger traders in particular, are seen by some investors as being 'enabled' by zero-cost brokers like Robinhood. As such, the trend has been dubbed the 'Robinhood effect'.
Foolish takeaway
I don't think the emergence of the 'Robinhood effect' is a particularly positive force on the shares market. Even so, I still welcome anyone 'democratising investing' by promising to lower costs and barriers for new investors. Thus, I think the launch of Superhero is a positive development for ASX investors.
