In most cases, stock trading is done by working professionals with lots of money – they can afford to pay around $7 for every transaction that they make. The new Robinhood application makes stock trading available to the masses – people who cannot afford to pay a transaction fee can now use Robinhood, in order to avoid the fees.
As of now, Robinhood is boasting hundreds of thousands of users, an Apple Design Award, around $66m in funding, and well over $1b in transactions.
What Robinhood Says
Joe Binney, the VP of Robinhood’s Product Engineering, who formerly worked for Facebook, said: “there are a bunch of brokerages with ugly stock apps and we’re not one of them.” Even since before the release date, Robinhood has been boasting about their amazing design – it aims to make stock trading much easier and bring it to younger people.
There is a huge footprint behind other stock trading platforms, such as Scottrade, that they had to charge around $7 per trade – this was in order to cover the costs of overhead. Since Robinhood relies on only a few engineers, they are able to eliminate that fee completely. This is something that Robinhood seem to be very proud of – this is because it allows those who only want to trade with a few hundred dollars without paying for a fee.
“Over the past 15 years, the underlying technology has changed and no player has put pressure on incumbents to change their pricing accordingly,” The co-founder, Vlad Tenev, says. Then, Robinhood came along. “There isn’t some cost we’re eating. This is a completely electronic transaction.”
How Robinhood is Earning Money
Rather than charging transaction fees, Robinhood has another way of earning money. Of course, Robinhood is still a business – they need to make money to continue operating successfully. What seems to be the main source of income for Robinhood is interest on users’ deposited cash.
In the past few days, Robinhood released their biggest update to their mobile-based application yet. In with the update are swipeable cards which contain personalized information and news. The information will keep users updated with their portfolio, marketplace sales and marketplace orders.
Rather than browsing multiple different websites in order to find the breaking financial news, Robinhood brings it straight to the user’s home screen. They can see more about the top losers, top gainers, updates regarding bank transfers, as well as dividends.
When tapping a card, users will be presented with a page full of content. Robinhood has also given each stock in the user’s portfolio a ticker, which displays headlines regarding the company. This means that if a company which a user owns shares in has an extremely bad earnings call, then the user will be able to learn more about it and start making trades immediately.
The application, with the new update, is currently available on iOS and Android. Robinhood is absolutely free to download.