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.

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