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How does eToro make money?

Our expert analysts have investigated eToro’s business model and explored the different ways it earns income. This handy guide explains all of the ways eToro makes money.
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Updated: Mar 15, 2023
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In our comprehensive eToro review, we explain the trading platform’s different services. In this guide, our experts have investigated its business model and charges. Read on to learn how eToro makes money. 

What methods does eToro use to make money?

eToro’s business model allows it to make money in three main ways. It’s a market-making broker, meaning it makes money from users losing trades. It’s also a zero-commission broker but has trading-related fees such as spreads. Finally, it has a range of non-trading related fees, including inactivity and withdrawal charges. 

How does eToro make money from market making?

eToro is not a pure market maker and operates a hybrid model using no dealing desk (NDD) and straight-through processing (STP) technology. Traditional market-making brokers work simply; when you lose, they win, and when you win, they lose. eToro’s approach is slightly different; however, it does still make money from your losing traders. 

It uses STP features to offset risk when markets are volatile, or buyers and sellers cannot be matched. It does this by releasing some volume of orders directly to liquidity providers. This means it does not make any money on these orders, other than the spread it charges. 

Generally, eToro is balanced and will match your order with another trader looking to take the opposing side. Although, in many cases, eToro itself will take the opposing side to your trade so it can profit if you lose. While it uses STP features and sometimes takes the other side, both methods involve NDDs, which means there is no interference from eToro on your trade or its outcome. 

What trading fees does eToro charge to make money?

eToro does not charge commissions, but it does have other trading fees such as spread. Below is an explanation of the trading fees eToro makes money from. 

Spread

Spread is the difference between the buy and sell price and eToro charges a spread on every available asset. This means each time you buy or sell a market, eToro will earn money via the spread. 

Its spreads are variable, meaning they fluctuate and are generally higher in volatile markets. While its spreads are variable, they are competitively priced compared with other brokerage platforms and start from just one pip in FX or 0.75% in indices. Reading up on eToro’s fees is beneficial before using the platform to trade. 

Rollover (overnight/weekend) 

Rollover is a small fee for CFD positions that stay open overnight or over the weekend. It’s a small percentage of the total value of the position and is essentially an interest payment on the leverage used. When trading CFDs, it is common to use leverage. eToro decides what interest it charges and can change the amount depending on market conditions. 

Crypto fees

There is no commission payable on trading cryptocurrencies on eToro; however, it does charge a 1% fee each time you buy and sell. This fee is automatically built into the spread and you will see it added to the price. This means if you buy Bitcoin on eToro, you will pay 1% of your total trade size when you buy and 1% when you sell. 

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How does eToro make money from non-trading fees?

eToro has several fees it charges for certain services. While it is free to use the platform, it makes money from users withdrawing their funds or not using their accounts for some time. Below are the non-trading fees eToro uses to make money. 

Withdrawal charges

eToro charges a flat $5 fee each time a user wants to withdraw their money. Once you learn how to withdraw funds on eToro, you will be charged $5 for every withdrawal you make from the platform. Non-trading-related fees such as its withdrawal charge is one of the ways it is able to offer zero commission trading. 

Inactivity fee

It also makes money by charging an inactivity fee of $10. This is applied to all accounts that have not used the platform for 12 months. It is similar to an administration fee for keeping your account active, even though you have not used it. Inactive accounts are not profitable for eToro, so the $10 charge is one way it can make money from its users. 

Conversion fee

All transactions on the eToro platform are based in US dollars. If you want to deposit funds using a currency other than USD, you will be charged a conversion fee by eToro. This fee will depend on your chosen currency and is between 150 – 3000 pips. A PIP is the smallest price move an exchange rate can make – usually the fourth decimal.  

How does eToro make money without commission?

It charges other fees that more than make up for not charging a commission. eToro has over 22  million users around the world. As we’ve explained on this page, it makes money using different methods and fees. Due to its high number of active users, it can easily offset the money it could earn from charging commissions. 

It’s zero commission offerings make it a more attractive broker to traders and investors wanting to keep costs down. The revenue it generates from the millions of users buying and selling on its platform adds up very quickly, allowing it to offer zero commissions without concern. 

How much money does eToro make?

While it is unclear how much it makes from each portion of its business, in 2021, eToro generated $1.2 billion, which was more than double the amount it made in the previous year. It is valued at nearly $9 billion and came close to going public via a SPAC in early 2022.

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Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.