Robinhood to start online banking

The trading app will offer saving and checking accounts to customers.

US money
Source: Bloomberg

The popular trading app, Robinhood, is branching out in its fintech business. The company just announced plans to offer checking and saving accounts to its customers.

Robinhood disrupts the brokerage and banking industries

Robinhood has been a disrupter in the finance business since the trading app launched in 2013.The corporation has built a strong following of six million customers, many of them millennials. The main feature of the app was its no-fee policy when clients were trading stocks. To capitalise on its success, the company hired a former executive from Amazon to be its chief financial officer (CFO) as part of its plan to go public next year.

Just as the business brought investing to mobile phones, Robinhood aims to bring the same ease and affordability to online banking.

Robinhood co-founder Baiju Bhatt promised to keep banking at a low cost once customers open accounts.

‘We as a company are going make the financial services industry more inclusive and are going to do it with zero commissions, a lower cost structure, and by relentlessly automating and building an engineering-first company. We're charging no fees, period,’ said Bhatt.

Robinhood Checking and Savings plans to entice customers with a 3% annual yield, 30 times the average interest of accounts.

How Robinhood makes money with no fees

Even though Robinhood doesn’t charge upfront fees for customers’ accounts, they profit from selling orders to big-name trading firms. The company has been criticized for claiming to be a small business, but still earning money from large corporations like Citadel. The corporation admits to the practice, but denies selling customers’ personal information.

Robinhood also makes money with a ‘freemium’ model in which trading is initially free, but buying and selling stocks with more money requires a subscription to its ‘gold’ program. Bhatt believes that the company’s entry into banking will be a success like the trading app.

‘If we roll this product out, and it's adopted by millions who love it and use, we will have one of the fastest growing financial service companies in history,' said Bhatt.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Find articles by writer