Robinhood steals stock trading from rich guys in suits and gives it to normal people who couldn’t afford to pay $7 per transaction. The zero-fee stock trading app is bonafide hit. Less than a year after launch it has hundreds of thousands of users, over $1 billion in transactions, $66 million in funding, and an Apple Design Award. In fact, it’s the first finance app to win that award. But it’s still pushing to make stock trading stylish, not just simple.
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“There are a bunch of brokerages with ugly stock apps and we’re not one of them” says Joe Binney, Robinhood’s VP of Product Engineering who was formerly at Facebook. Since its inception in 2013, Robinhood has put a huge emphasis on design because it’s trying to bring stock trading to a whole new demographic: young people.
The huge brick-and-mortar footprint of E*Trade and Scottrade meant they had to charge $7 to $10 a trade just to pay for overhead. But by relying on just a handful of engineers, Robinhood has used software to eliminate that fee. Suddenly, people who are only trading with a few hundred bucks won’t have all their gains erased by fees.
“Over the past 15 years, the underlying technology has changed and no player has put pressure on incumbents to change their pricing accordingly” says co-founder Vlad Tenev. That is, until Robinhood came along. “There isn’t some cost we’re eating. This is a completely electronic transaction.” (Disclosure: I knew Tenev and his co-founder Baiju Bhatt from college, and was in the same fraternity as Tenev.)
Just because it doesn’t charge for trades doesn’t mean Robinhood doesn’t have the potential to become a serious business. It’s already earning interest on the cash balances that users store with it. It’s also beta testing a way for users to pay a trial rate of 3.5% to trade using margin, or money they’re owed but that hasn’t deposited in their accounts yet.
Still, most stock tracking and trading apps aren’t built for a more casual demographic. “What makes existing products in the space so unfriendly is that you see all this information and none of it is specific to you so you have no idea what you should be looking at”, says Tenev. Impenetrable walls of acronyms and fluctuating dollar amounts are not how you democratize an already daunting activity.
Buy And Sell With Style
So today, Robinhood released its biggest app update yet. It brings little swipeable cards of personalized information about your portfolio and the market right to the home screen. The update comes to iOS today and Android soon.
Instead of having to hunt through websites and news feeds, Robinhood’s cards display breaking financial news, the S&P 500 top gainers and losers, your portfolio’s top gainers and losers, and updates about your bank transfers, scheduled and paid dividends, and orders.
Tap a card and a hosted page of content will spring up inside the app. And Robinhood also gave each stock in your portfolio or that you a track a ticker of top headlines about the company. So if a tech giant you own shares in releases a new app or has a bad earnings call, you’ll be able to learn about it and make trades all inside the Robinhood app.
Of course, giving millenials a way to bet their money on the stock market as quick as they post a selfie has its risks. Robinhood hopes its zero-commission stock trading will teach the next generation about the power of investing, but inevitably some users will lose their stakes. That’s why the company plans to also include educational tips and insights about investing in its cards.
The buzz from a million people joining Robinhood’s waitlist and its recent $50 million Series B led by NEA has attracted some competitors. Stash, for example, uses a lot of the same marketing about “democratizing stock trading” but it still charges monthly fees.
Robinhood is already the fastest-growing brokerage of all time, according to the company, and it had to jump through years of regulatory and security hoops to build its own brokerage technology stack. It won’t be easy for anyone trying to catch up as long as Robinhood keeps security locked tight. Plus now Robinhood is eying international expansion. It has 20,000 users waitlisted in Australia where per trade fees can reach over $50.
As Robinhood gains momentum, it’s becoming clear that its building not just an app, but a brand around modernized finance. With that, and the lucrative equity it can offer recruits, Robinhood is becoming an alternative for top young talent looking to ditch the soul-grinder that is New York investment banking.
Meanwhile, surrounded by murals inspired by the anthropomorphic foxes of Disney’s Robin Hood cartoon, the startup’s plush Palo Alto headquarters is bustling with a team of 40. Tenev concludes “Not a lot of smart Stanford people with engineering backgrounds want to work at a bank.”
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