Launched in March of 2015, the mobile investing platform Robinhood has quickly gained a usership of over 3 million individuals and has completed stock trade transactions in the billions of dollars. The company was created by Biju Bhatt and Vladimir Tenev with the goal of giving young adults a platform in which they could participate in trading on the financial markets in an inexpensive, fast, and dead simple way. In a recent interview, Bhatt told Business Insider, “We have done $75 billion in transactions so far. And we recently hit 2 million users (updated Nov. 1, 2017). We also have saved customers $500 million in commissions.”¹ The Venture Capital firm DST Global definitely believes in the business platform, investing a $110 Million Series C round, giving the start up a $1.3 Billion dollar valuation in April of 2017. While major trading platforms from the leading market players, i.e. E-Trade, TD Ameritrade, and Charles Schwab were charging close to $10 per trade, Robinhood has completely changed the game by offering $0 dollar trades on the major U.S. stock markets.
While there are clear limits on the types of trades one can execute commision free, see commision chart, for the average new investor, the major US markets present more than ample opportunities to become experienced in trading and yes, make money. Clearly, there are steep transaction fees for foreign trades, yet the premise of the platform, which as of today is totally mobile based, is to be a simple and easy to use for an uninitiated investor, who would not need access to foreign markets.
When I was first exposed to Robin Hood, I was extremely skeptical and the first question I asked was, “How do they make money?” The answer is simple, Robin Hood Gold. The pricing structure is clearly laid out on their website, which simply states with the more money deposited an increasing monthly fee is charged. This is somewhat different from classic trading platforms, many of whom will not charge a monthly fee but rather charge on a per trade basis, as I have highlighted previously. Buying power is increased, with an individual being able to choose which level of buying power they would like to utilize and then being charged on a 30 day basis for the level they desire. I feel that based on their target market, young professionals, that their monthly Gold pricing is extremely reasonable. An individual that is interested in Gold level buying power that deposits $3,000 and chooses to have buying power of $1,500 would be charged $9 dollars per month. One would be able to complete numerous trades in that period for the cost of a single trade on a competitor’s platform.
The layout and design is extremely user friendly, winning the Apple Design Award. Bhatt notes, “When young people are investing in the stock market, their behaviors are much closer to how people navigate products like Spotify or Amazon, rather than traditional investing products.” The stock charts are extremely familiar to the Apple Stocks App making it familiar to use. All your necessary tools are right at your fingertips including connecting or transferring to your bank account, looking up stocks, and executing trades. The trading screen is very intuitive, allowing you to process multiple order types and instantly calculating the market price and estimated cost based simply on the number of shares selected. I was have been very impressed by the security of the app, which requires you to use fingerprint scanner every time you re-look at the app, even if it is opened in you iPhone queue and you switch to another app then return to it. The Robin Hood Help center is an simple page that clearly explains differences between Robin Hood basic and Gold, states the advantages of both, and walks users through using the platform to begin trading.
While the current platform is only available on mobile apps available in the App Store and Google Play, Robin Hood is planning to release its full web platform that will be available on full computers early in 2018.
While the accessibility to $0 trading seems like great opportunity to introduce individuals to the financial markets, Robin Hood has not been without criticism. Critics worry that allowing individuals with zero knowledge to buy and sell at will is a risky bet for millennials that are already strapped for cash. Personally, I feel individuals should be free to spend their money as they please, and the notion that one is interested in learning about the financial markets in order to create wealth is something that should be fostered rather than fretted over. (Personal Bias)
I have just recently begun to utilize Robin Hood as a platform and I have been impressed by the ease of use and I really think it’s awesome that each trade is free based off the relatively small amount of money I am using to trade. Let me know in the comments below if you have any familiarity in using the Robin Hood Platform, if you like it, or if you would be willing or not to try it out?
(All screenshots were taken from Robin Hood website or the App)