The clock is running out for Europe's neobrokers. By June 30, free trading as millions of retail investors have come to know it faces a structural overhaul, and the companies that built billion-dollar valuations on the back of it are scrambling for alternatives.

The Hidden Fee Behind “Free” Trading

Payment for order flow, or PFOF, has been the financial engine quietly powering companies like Trade Republic and Scalable Capital for years. The mechanics are simple: instead of charging customers a commission, brokers route client orders to designated market makers or trading venues, which pay the broker a rebate in return. FinanceMagnates.com reported on the European Parliament's push to ban the practice as far back as March 2023.​

The controversial practice drew widespread attention in 2021, when commission-free trading apps pioneered by Robinhood were booming. While the model itself was not illegal, Robinhood failed to provide its clients with the best execution rates, thereby violating regulations, for which it was fined by the SEC.

Critics argued the arrangement created an obvious conflict of interest. A broker collecting PFOF has an incentive to send orders where the kickback is highest, not necessarily where the customer gets the best execution price.

The EU agreed. Under revised MiFID/MiFIR rules, the practice is banned across the bloc from June 30, 2026, with Germany and a handful of other member states that had previously allowed PFOF granted a temporary exemption running until that same deadline.

Germany's Outlier Status in Europe

While the PFOF ban is technically an EU-wide rule under the revised MiFIR framework, its real-world disruption is almost entirely a German story. Most EU member states, France, the Netherlands, Sweden, Italy, and Spain, among them, had already banned or never meaningfully adopted PFOF, meaning the June 2026 deadline changes little for brokers operating under their regulatory regimes.

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Germany was the only EU member state to formally notify ESMA of its intent to use the temporary exemption, doing so in March 2024, which bought its domestic platforms roughly two additional years to keep the model alive for German-resident clients.

Austria briefly explored filing for the same carve-out but never submitted a formal notification. No other EU country appears on ESMA's published exemption list. The result is a pressure point that is, for now, uniquely concentrated in Germany's retail brokerage market, home to Europe's largest neobroker by customer count in Trade Republic, and the fiercest competition on the continent for low-cost retail investing.

Germany Gets a Deadline, Not a Pass

The temporary carve-out for Germany has allowed Trade Republic, which routes trades through Lang & Schwarz Exchange, to continue earning PFOF revenue from its German clients right up to the summer cutoff. Belgian or French clients? No such luck. The exemption only covers investors residing in the same member state as the broker.

That deadline is now months away. PFOF reportedly accounted for less than 30% of Trade Republic's revenues, according to its own admission, but the company acknowledged it remains a meaningful income source.

In January 2026, a Trade Republic subsidiary received a license from Germany's BaFin to operate a multilateral trading facility (MTF), which would allow the company to match orders internally and potentially act as a market maker itself, effectively keeping trading economics in-house rather than farming them out.

Whether Trade Republic will fully activate the platform, or pursue parallel alternatives, remains unclear.

Smartbroker Takes a Different Path

Not everyone is scrambling to rebuild infrastructure from scratch. Smartbroker is taking a more direct approach to the transition: simply forgoing PFOF revenues altogether.

"Against the background of the regulatory changes, Smartbroker will no longer receive payments from so-called payment-for-order flow (PFOF) contracts in the future," CEO Thomas Soltau told WirtschaftsWoche. Crucially for customers, the company says fees will not increase as a result.

Soltau had signaled the company's resilience before the ban was imminent. In earlier interviews, he argued that Smartbroker's business model was never existentially dependent on PFOF in the same way some competitors were.

The company grew to over 267,000 securities accounts and €9.2 billion in client assets by end of 2022, partly by capturing customers migrating from higher-fee brokers.

Broader Industry Under Pressure

The end of PFOF doesn't just hit revenue lines, it forces a rethink of what neobrokers actually are. Jens Chrzanowski, director of XTB's German branch, lays out three distinct categories now competing for the same retail investor: the classic online broker with broad product coverage and professional-grade tools, the neobroker built around mobile simplicity and low-cost access, and the emerging "super app" that bundles banking, investing, savings, and payments into a single ecosystem.

The distinction matters because each model has a different answer to the PFOF problem. Subscription fees, interest on client cash balances, securities lending, and proprietary trading venues are all on the table.

Scalable Capital, for example, already operates a subscription model charging €2.99 per month, a structure that could absorb the PFOF shortfall without raising per-trade costs. A straightforward increase in order fees appears unlikely in a market as competitive as Germany's, where brokers are still fighting hard for each new customer.

Trade Republic's expansion into new markets, including a September 2025 move into Poland, signals that scale remains a central part of its post-PFOF strategy.

Platforms with more customers spread the fixed cost of compliance and infrastructure across a larger base.

XTB's Super App Bet

While German-focused neobrokers navigate the PFOF transition, Warsaw-listed XTB is moving in a different direction entirely, toward the super app model Chrzanowski describes. The company has already introduced an eWallet integrated directly into its trading app, supporting payments in 19 currencies and compatible with Google Pay, Apple Pay, and Garmin Pay.

The goal, as XTB frames it, is to position itself not merely as a trading tool but as the single app where a customer's money lives and works.

"We are entering a period that will be the first serious test for eWallet," XTB CEO Omar Arnaout said when the multi-currency service expanded last year. The company also launched AI-curated news feeds for individual stocks, a first step toward embedding machine intelligence into the customer experience rather than marketing it as a novelty feature.