Robinhood will take on Banks with 3% checking and savings accounts

By Michael K. Spencer

Robinhood is really a Millennial centric trading app that I’ve always preferred to the high-transaction fees of Coinbase that has pushed its valuation up somewhat artificially.

Robinhood is also more inspirational with its tactics. In a somewhat surprising move, Robinhood is launching no-fee checking/savings with Mastercard & the most ATMs. This is a FinTech move at its finest.

It’s literally going after banks with a 3% checking and savings accounts, around 30x the national average. Robinhood is a popular online stock-trading platform that got into crypto and became ever more popular.

As of December 13th, Robinhood will have a new app that integrates the new feature. These “Robinhood Checking & Savings” accounts have no fees or account minimums, building off of the company’s free stock-trading model that ushered in 6 million users and a $5.6 billion valuation in its five-year existence. There’s something refreshing apps like this, and it reminds me a bit of the flavor of Revolut and Venmo.

zero-fee banking in an app? Hard not to like what Robinhood is offering

Banks and even Coinbase don’t like the zero-fee transactions value proposition of Robindhood, since it’s so against their business model. Now Robinhood going into checking and saving accounts, it’s irksome for the future of finance to say the least. Robinhood, which disrupted Wall Street with zero-fee transactions, is taking aim at an even bigger market: banks. You better believe it. This has just become something worth looking into.

If Robinhood’s app could do all of these things and have a crypto wallet as well, a lot more young people would look into it. Coinbase feels too corporate in its approach and Robinhood feels must more convenient to actual users in the range of things it is going after. Being customer-centric is really important, and I like what Robinhood is building on the philosophy of zero-fee banking.

Even the mechanics of how this works is appealing, basically customers will earn 3 percent annually on money in either accounts, paid out on a daily basis. This is something where you see the rewards up-front which is nice.

There commitment not to charge fees is really disruptive vs. Coinbase and the banks.

“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,” ~ Robinhood’s co-CEO Baiju Bhatt. “We’re charging no fees, period.”
  • Robinhood is undercutting the big banks
  • Taking on the banks means forgoing brick-and-mortar branches with its new zero-fee checking and savings account features.
  • Robinhood makes Coinbase fees look ridiculous as it gets deeper into crypto as well
  • With no overdraft or monthly fees, a racy 3 percent interest rate, and a claim of more US ATMs than the five biggest banks combined, it’s reaching the point of viability of end-users.
Robindhood Crypto is here
  • Robinhood as a start-up taking the disruptive no-fee model to checking and savings accounts, a fundamental way retail banks make money. J.P. Morgan Chase is doing a Facebook, trying to copy the model and clone the result.

Robinhood’s momentum is very decent and the range of services they now offering is reaching a tipping point where the app is getting seriously attractive. Though it’s still a pretty early-stage startup. Let’s consider Robinhood saw massive growth in 2018 alone, jumping from 5 to 6 million customers in a matter of months and was recently valued at $5.6 billion.

To be disruptive you need to acquire users at all costs, shunning profits for long-term plays. You might even say Robinhood is taking a page out of Amazon’s playbook by shunning profits for growth. It can kill the competition, but you need serious backing. Robinhood has reached that acceleration point where 2019 can be rather significant for it.

Robinhood is also refining its business model as it goes. So with a rather lean 300-employee operation, it earns a margin on investing your money in US treasuries, and a revenue share with Mastercard on interchange fees charged to merchants when you swipe. What can Robinhood become? Taking wealth from the rich and giving it to the poor, the metaphor is outstanding. It’s proving now it’s more than just another brokerage app. By getting into banking and crypto, it’s doing something special.

Robinhood also makes money on a paid subscription service called Robinhood Gold launched in September 2016. In an age of dumb and exploitative banking, where banks routinely hammer and shock users with surprise fees and mediocre user experience, there’s a huge opportunity for a mobile-first startup to disrupt how we store money. Foot traffic isn’t just declining for brick and mortar retail, but banks as well. Society is doing more mobile banking than ever.

It feels like the Menlo Park, California-based firms ready to become a full-on financial services company. This is the sort of startup I’d buy if I was Amazon once I’m ready to go into banking more seriously. Young people have been so screwed over by 2008 and the financial system in place that favors the wealthy, that commission-free banking is the future of banking. Just as young people can’t afford to play the stock market, so they invest a little in crypto. It’s the new wave, and Robinhood looks here to play it.