Earlier this week, the stock trading app Robinhood announced that it would provide users with a new feature in early 2019: a check and savings account, free of charge. However, after the film has been heavily criticized, the company seems to have declined. He plans to "work closely with the regulators in preparing our cash management program."
The company was founded in 2014 and allowed users to trade shares in companies listed on the US stock exchanges for free. A year later, the user base had grown to "hundreds of thousands" of customers who had transferred "$ 1 billion" to the platform. Earlier this year, a new feature was introduced that allows users to trade cryptocurrencies, and it is reported that discussions have been held with regulators to offer other banking products, such as savings accounts.
and Bloomberg noted at the time that most financial start-ups were surrounding this by partnering with existing banks and licensees. Earlier this week, Robinhood launched its new feature: a tempting savings and verification feature with a Mastercard debit card and no ATMs, membership, overdraft, transaction or other fees. All this at a hefty 3 percent interest rate ̵
The problem is that apparently nobody has told the SIPC that this is happening, and although the accounts look like bank accounts, they are not. Companies like SIPC and FDIC provide significant protection for those who invest their money in securities or banks if they fail. (The agencies were founded after the Great Depression.) SIPC chief Stephen Harbeck told TechCrunch that Robinhood "would buy securities for his account and share some of the proceeds with their clients," and that's nothing to cover them. Harbeck also said Bloomberg that the company had come to them with the feature in advance that he had "serious concerns about it".
Analysts were less charitable: CNBC reported UBS analyst Brennan Hawken called it "a potentially risky move that is very close to banking and therefore could raise regulatory oversight ", and it seems that" more looks. " similar to a money market fund "and not a bank account, and users could experience" frictional effects in and out of the product ". Hawken also pointed out that Robinhood invests in government bonds (which currently have an interest rate of 2.7 percent). ) and may have made some arrangements with ATM retailers to generate revenue to maintain the 3 percent interest rate for consumers.
After the backlash, Robinhood deleted her opening blog post and released a new one from co-founders Baiju Bhatt and Vlad Tenev. He said that the announcement of the announcement that they were "excited and humbled" about the response to the product, "the announcement maybe." have caused some confusion, "and they said they intend to" work closely with supervisors as we prepare for the introduction of our cash management program, "and" revise "the program's market performance.
What this new "cash management program" looks like is unclear. Robininia spokeswoman Lavinia Chirico has not responded to repeated requests for comments and clarifications on what the future of the feature might look like or which regulators the company is talking to. The company is currently signing up for cash management queues, but details of what that looks like will remain scarce. The fine print of the login email merely states that it will be added to its broker account and "and will not be a separate account or bank account", and says that there will be "additional information about the email account" Cash management program as soon as it is ready. "