For young and inexperienced investors, Robinhood is one of the best platforms for trading and owning stocks. Robinhood is an investing application, which unlike many other brokerage services, offers no fee to the trading of stocks. While traditional brokerages allow their clients to make money on the cash sitting uninvested in these accounts and charge fees for trades, Robinhood offers no fees for trades and makes money off the interest of unused funds in customer accounts, as well as an additional product Robinhood Gold, which is not required for any users or accounts. Currently, the app is giving traditional brokerage services a run for their money, as they recently adopted Bitcoin trading into their platform.
In the United States, Robinhood sits as the second most valuable fintech company, exceeding a value of $5 billion with more than 4 million customer accounts. Recently, Robinhood overtook its rival E*Trade, in large part due to their cryptocurrency offering. According to Co-CEO, Vlad Tenev, Robinhood saw a significant intake in customers following the launch of Robinhood Crypto.
Possibly the most interesting aspect of Robinhood Crypto is the margins it provides for the company. The company is essentially allowing crypto training for free which provides a break-even result. According to Tenev, “we don’t intend to make very much money on it at all for the foreseeable future. We intend to operate it as a breakeven business.”
With all the craze around cryptocurrencies, specifically Bitcoin, both Lenev and Co-CEO Baiju Bhatt, want to utilize cryptocurrencies as a catalyst. By offering free trading of cryptocurrencies, both CEOs believe that can get new or inexperienced investors to get involved in currency exchange and eventually they will begin to trade other assets, like stocks, on Robinhood which yield those higher margins. In an interview with “The Ledger”, Tenev stated, “The thinking behind that is what we’re really doing is building an ecosystem. Right now, the products are investing products, so crypto slots in very nicely alongside the 10,000 plus other instruments that people can trade.”
Beyond cryptocurrencies, Tenev and Robinhood truly embrace the idea of commission-free trading. They argue that in the past, this made sense as many manual and physical aspects were involved in completed trades. In this day and age, trades are purely electronic and the only expenses are the data centers, network, and data infrastructure, which they argue does not warrant a $5 to $10 charge per transaction.
With that thought process in mind, Robinhood is looking to continue to expand the services they currently offer to provide better rates and conditions for customers. Currently, the company only allows trading on Bitcoin and Ethereum; however, the company is currently tracking at least 16 additional currencies including Litecoin and Ripple. Beyond stock and cryptocurrencies, Robinhood embraces the ideology that many financial services and products are taking advantage of the customer across the board. Tenev said that ideally, the company will offer all the services that Bank of America currently provides. As they proceed, they are being sure to go cautiously and ensure they are on top of government regulations and security.