Robinhood Crypto Trading App Hits 10 Million Accounts; Is the Free Commission Model Sustainable?

The free-commission idea by Robinhood caused a disruption in the brokerage industry with most millennials gradually opting for their stock and crypto trading product. According to a blog post by Robinhood, the company was founded to break existing barriers to access financial markets. This seems to be working well for Robinhood given their recent expansion in professional human capital and interest to go public.

Today, the platform’s users’ medium age is at 30 and Robinhood is optimistic that this age group will grow its business to match the likes of TD Ameritrade and Charles Schwab. Its premium services which include a cash management program and the Robinhood Gold $5 monthly have attracted even veteran investors to the exchange. Vladimir Tenev, a co-CEO at Robinhood, echoed that the firm’s purpose;

“We’ve always been focused on opening up access and being the most customer-centric financial services company. I think in some ways what’s happened in the industry is great for consumers,”

Robinhood’s Shortcomings

The fall of FinTech startups like WeWork, Lyft, and Uber raise the question of whether Robinhood has any similar red flags experienced by the former. Just like any other firm, Robinhood has had its fair share of challenges since its conception in 2013. Some financial market analysts believe that any of the challenging factors could trigger a case of a one-time startup as has been in the past five years.

One notable flop by Robinhood was its 3% interest paying saving product which failed to meet regulatory requirements. They however re-launched the product at 2% later on but it did not yield the expected reaction from its clientele and target market. Robinhood’s unlimited margin has also been criticized as a possible governance challenge if not kept in check. The firm also recently lost its Head of Product who left the position before completing a year. Finally, its revenue model sustainability is not very clear despite raising huge amounts of funds.

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