Newsletter #22 (Premium): Strategic insight into Robinhood, the day trading app. Are they the good samaritan, or an evil menace? Find out here.
A disruptive and controversial trading app
Robinhood is a disruptive (and controversial) trading app and the 4th most downloaded financial services app in 2020.
It was launched in 2013 when founders Baiju Bhatt and Vladimir Tenev saw an opportunity to disrupt the investment broker market....which they did!
Today, Robinhood has more that 18 million customers who are predominently young men, with average to poor credit ratings and who have never invested in the markets before.
And the pandemic has been an accelerant for Robinhood.
The markets have boomed at the same as people have shifted to working from home, giving them more free time, whilst increasing their disposal income with less opportunities to go out and spend it.
Exploiting Silicon Valley's best techniques for engagement and technology addicition, Robinhood have ridden the perfect storm.
The two big growth areas for Robinhood are options trading and the buying and selling cryptocurrency. Both are highly risky and both carry the very real possibility of the trader losing all of their money on a trade (something that is not so likely 99 times out of a 100 in a conventional trade to buy stocks).
Named after the fictional character who robbed the rich to feed the poor, Robinhood's founders say they created the platform to "democratize America's financial system".
Their mission was to make it cheaper and easier for a new generation of investors to begin building their wealth in the stock market.
However, as we will see, far from being the people's hero redistributing wealth from the haves to the have nots, Robinhood are using technology and techniques to trade on a "get rich quick" promise.