Mobile Apps Robinhood and Acorns

The future of FinTech?


There has been a lot of buzz recently around Financial Technology — new companies working in a space dominated by big banks and financial institutions. Most of these start ups are using mobile apps to engage a younger audience that is less likely to invest their savings. Recently I have taken Robinhood and Acorns for a spin, and have had a positive experience with both. I do have lingering concerns over the health of the user-base for both applications but first, an overview:

Robinhood is an app that allows users to place market orders from their phone. The interface is what you expect from an iOS app in 2015: swipe left for contextual menus, gentle curves, and smooth transitions. If nothing else, the app is pleasant on the eye.

Thankfully the mechanics are sound as well. Right now the feature set is light (they just added limit orders the week of this publication). You can add stocks to a watch list, easily access the buy/sell menu, or click on the ticker to see some basic information (market cap, volume, 52 week high/low). The biggest selling point is that Robinhood charges $0 per trade in fees, which enables new investors to keep their profits on even the smallest of transactions. On other platforms a $7 per transaction fee structure makes generating a return off a ≤$100 trade a prodigious task.

Some might argue that apps such as Robinhood encourage day trading, gambling and reckless behavior. While there will be uninformed users making risky trades, the overall good outweighs the negative. Removing fees and increasing the population exposed to thinking about investment strategies should be seen as a net positive. Due to the low buy in I can even envision this app being used in Universities to boost financial literacy; trading with real money, no matter the amount, elevates the stakes over a free-to-play Stock Market Game.

That being said, the app is still lacking in the tracking department. There is no way to view upcoming earnings dates, 3 year financial statements or more detailed financial metrics. I would like to see intermediate traders given more to work with; for now having a tab open to Yahoo Finance or some another data source is still necessary.

Acorns is a bit different. They offer basic portfolio management over a diverse set of assets in which users can inject funds. The hook here is that you can set the app to “round up” your debit card purchases and automatically invest the spare change. For example, if I spend $7.50 at Chipotle, I can have Acorns remove the remaining ¢50. Once at least $5 has accumulated inside the app, funds can be added to the portfolio. While the app doesn’t yet offer a piggy bank theme or skin, this spin on the classic saving method is quite ingenious. I know a few banks offer this feature as well, were the rounded up money gets deposited into your savings account, but Acorns allows you to earn more than puny interest. As someone who is looking for more exposure in the markets, I much prefer Acorns to a simple savings scheme.

I still collect spare coins in jar, but at some point the concept of physical money will be archaic. Acorns has positioned itself to be a must use app for the thrifty penny pinching investor of the future.

I do have one concern about the long term viability of these apps: what happens to user engagement after the next market correction? Apps like Robinhood tout the number of young investors using their platform. But is this segment not the most fickle of all? Right now times are good for the Dow and other market indexes, but when these new investors see their meager returns wiped out or reduced, I wouldn't be surprised if many permanently pull out. The success of these FinTech companies depends on their user’s fortitude.

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