Robinhood led the way in zero commission equity trades since 2013. Now, major discount brokerages like Fidelity, Schwab, E-Trade and TD Ameritrade are following suit. These established brand names have large user bases, a wide variety of services, and substantial assets under management.
Fidelity has around 20 million accounts (a little more than Coinbase), and Charles Schwab has approximately 10 million user accounts. Meanwhile, Robinhood has less than 6 million accounts as of earlier this year.
Traditional established brokerages have a leg up on Robinhood because they provide users with more options that range from bonds to mutual funds, and will likely have more assets under management than Robinhood. For instance, Fidelity has over $1 trillion in assets under management. That’s right, over $1 trillion!
These other services and options provide healthy, diversified streams of income for these traditional established brokerages.
But if Robinhood is competing on primarily zero commissions and a mobile-friendly application. Where does this leave Robinhood in the new era of zero commissions across the board? Further, the company faces competition from upstarts like M1 Finance, Webull, and All Of Us, who also offer zero commissions and one or two unique features.
Where Does Robinhood Go From Here?
The firm currently earns money in partnerships with high-frequency trading firms, “interest from cash and stocks” and Robinhood Gold, its premium model.
Earn Interest with Robinhood Checking & Savings
The next steps seems like it will be FDIC insured cash management. It recently released its Cash Management option, which allows users to earn more than 2.00% APY on uninvested cash held within their accounts. But even if Betterment, Wealthfront, Chime, Acorns, and others offer high yield savings accounts, switching costs and managing multiple accounts might be a hassle. Robinhood offers simplicity, trading, and savings all in one easy to access location. Finally, interest is subject to change.
Robinhood also offers crypto trading which might experience growing usage as it lets users trade digital assets like Bitcoin and Ethereum, Bitcoin Cash, Litecoin, Dogecoin, Ethereum Classic, and Bitcoin SV with zero fees. Robinhood users don’t have to worry about withdrawal fees, conversion fees, and other additional costs with trading digital assets. Other entities in the crypto sector, like Coinbase, raised prices to trade.
Users will also have access to a Mastercard debit card connected to their savings account, allowing Robinhood to collect debit card swipe revenues.
Will Robinhood Need To Do More?
Yes. Interest, crypto, and debit cards have a whole host of competitors from established entities to new entrants backed by prominent financiers. Robinhood will have to concentrate on specific segments to stay in line with its valuation and be competitive.
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