The clockis running out for Europe's neobrokers. By June 30, free trading as millions ofretail investors have come to know it faces a structural overhaul, and thecompanies that built billion-dollar valuations on the back of it are scramblingfor alternatives.The Hidden Fee Behind “Free”TradingPayment fororder flow, or PFOF, has been the financial engine quietly powering companieslike Trade Republic and Scalable Capital for years. The mechanics are simple:instead of charging customers a commission, brokers route client orders todesignated market makers or trading venues, which pay the broker a rebate inreturn. FinanceMagnates.comreported on the European Parliament's push to ban the practice as far back asMarch 2023.The controversial practice drew widespread attentionin 2021, when commission-free trading apps pioneeredby Robinhood were booming. While the model itself was not illegal,Robinhood failed to provide its clients with the best execution rates, therebyviolating regulations, forwhich it was fined by the SEC.Criticsargued the arrangement created an obvious conflict of interest. A brokercollecting PFOF has an incentive to send orders where the kickback is highest,not necessarily where the customer gets the best execution price. The EUagreed. Under revised MiFID/MiFIR rules, the practice is banned across the blocfrom June 30, 2026, with Germany and a handful of other member states that hadpreviously allowed PFOF granted a temporary exemption running until that samedeadline.Germany's Outlier Statusin EuropeWhile thePFOF ban is technically an EU-wide rule under the revised MiFIR framework, itsreal-world disruption is almost entirely a German story. Most EU member states,France, the Netherlands, Sweden, Italy, and Spain, among them, had alreadybanned or never meaningfully adopted PFOF, meaning the June 2026 deadlinechanges little for brokers operating under their regulatory regimes.[#highlighted-links#] Germany wasthe only EU member state to formally notify ESMA of its intent to usethe temporary exemption, doing so in March 2024, which bought its domesticplatforms roughly two additional years to keep the model alive forGerman-resident clients.Austriabriefly explored filing for the same carve-out but never submitted a formalnotification. No other EU country appears on ESMA's published exemption list.The result is a pressure point that is, for now, uniquely concentrated inGermany's retail brokerage market, home to Europe's largest neobroker bycustomer count in Trade Republic, and the fiercest competition on the continentfor low-cost retail investing.Germany Gets a Deadline,Not a PassThetemporary carve-out for Germany has allowed Trade Republic, which routes tradesthrough Lang & Schwarz Exchange, to continue earning PFOF revenue from itsGerman clients right up to the summer cutoff. Belgian or French clients? Nosuch luck. The exemption only covers investors residing in the same memberstate as the broker.Thatdeadline is now months away. PFOF reportedly accountedfor less than 30% of Trade Republic's revenues, according to its ownadmission, but the company acknowledged it remains a meaningful income source. In January2026, a Trade Republic subsidiary receiveda license from Germany's BaFin to operate a multilateral trading facility (MTF),which would allow the company to match orders internally and potentially act asa market maker itself, effectively keeping trading economics in-house ratherthan farming them out. WhetherTrade Republic will fully activate the platform, or pursue parallelalternatives, remains unclear.Smartbroker Takes aDifferent PathNoteveryone is scrambling to rebuild infrastructure from scratch. Smartbroker istaking a more direct approach to the transition: simply forgoing PFOF revenuesaltogether. "Againstthe background of the regulatory changes, Smartbroker will no longer receivepayments from so-called payment-for-order flow (PFOF) contracts in thefuture," CEO Thomas Soltau told WirtschaftsWoche. Crucially for customers, the company saysfees will not increase as a result.Soltau hadsignaled the company's resilience before the ban was imminent. In earlierinterviews, he argued that Smartbroker's business model was never existentiallydependent on PFOF in the same way some competitors were. The companygrew to over 267,000 securities accounts and €9.2 billion in client assets byend of 2022, partly by capturing customers migrating from higher-fee brokers.Broader Industry UnderPressureThe end ofPFOF doesn't just hit revenue lines, it forces a rethink of what neobrokersactually are. Jens Chrzanowski, director of XTB's German branch, lays out threedistinct categories now competing for the same retail investor: the classiconline broker with broad product coverage and professional-grade tools, theneobroker built around mobile simplicity and low-cost access, and the emerging"super app" that bundles banking, investing, savings, and paymentsinto a single ecosystem.Thedistinction matters because each model has a different answer to the PFOFproblem. Subscription fees, interest on client cash balances, securitieslending, and proprietary trading venues are all on the table. ScalableCapital, for example, already operates a subscription model charging €2.99 permonth, a structure that could absorb the PFOF shortfall without raisingper-trade costs. A straightforward increase in order fees appears unlikely in amarket as competitive as Germany's, where brokers are still fighting hard foreach new customer.TradeRepublic's expansion into new markets, including a September 2025 move intoPoland, signals that scale remains a central part of its post-PFOF strategy.Platformswith more customers spread the fixed cost of compliance and infrastructureacross a larger base.XTB's Super App BetWhileGerman-focused neobrokers navigate the PFOF transition, Warsaw-listed XTB ismoving in a different direction entirely, toward the super app modelChrzanowski describes.The company has already introducedan eWallet integrated directly into its trading app, supporting payments in19 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 thesingle app where a customer's money lives and works."Weare 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 firststep toward embedding machine intelligence into the customer experience ratherthan marketing it as a novelty feature.This article was written by Damian Chmiel at www.financemagnates.com.