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Founders of RobinHood Baiju Prafulkumar Bhatt (right) & Vladimir Tenev (left)

Disrupting The Stock Exchange

Ishan Haque
May 12, 2015 · 5 min read

The hottest financial tech startup you've never heard of is disrupting the stock market by allowing millennials to buy and sell stocks seamlessly through their app. Here’s the catch (or should I say no catch?): $0 trade commission fees.

Authors Note: I’m a 15 y/o from Australia that’s interested in technology, finance, business, startups etc. Follow me at @IshanHaq.

What is RobinHood? How will this app change the stock market? Why is a 15 year old writing about this app?

RobinHood is a commission-free, mobile-first stock brokerage.

The most eye-catching magnet to this is that it’s (second question) commission-free; when you invest in stocks through a normal online broker, depending on where you live and other various factors, it can cost as much as $10 to $65 for every time you buy a stock. While RobinHood allows users to trade stocks for free, absolutely $0.

It’s designed beautifully, a true (third question) native mobile experience. This app is specifically developed and designed to suit the needs of a rookie wanting to delve into the stock market.

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RobinHood app screenshots

Let’s recap:

  • Mobile first experience: Designed and developed to be used seamlessly. Specifically targeted to the millennial generation, to be used by the young folks who want to start investing but have neither little money nor the experience to go through the process of an online brokerage.
  • Upgrading the century old system: No more do we have to go through the tedious process of buying and selling stock. When mobile, you can add features that can make the experience of an existing process much more pleasant. Notifications plays a huge role, notifying you when’s the latest time you can purchase shares or updates you on important shareholder information (dividends, high-low reminders etc). Replacing old with new technology is always going to be more efficient, buying stocks within 3 taps of your fingers in a short period of time is amazingly disruptive to all online brokerages.
  • Giving the key to the chest: They’re making investing accessible to younger people. This unlocks a much younger, less wealthy audience that has previously been scared from stock trading because of a $10-$65 fee that eats their profits.

What’s the progress thus far?

The technology behind it

By automating many of the costly duties that existing brokerages maintain as a holdover from the pre-Internet era, they could build a much more cost efficient and enjoyable brokerage. This was an opportunity and challenge they were very excited about. (https://robinhoodapp.zendesk.com/hc/en-us/articles/202853579-What-s-the-story-behind-Robinhood-)

Before there were brokerages that would pay for Superbowl ads, stores and other expensive (in)tangible goods. To recoup those cost, they need to slide in the $10 fee when trading stocks. Essentially RobinHood cuts out the fat and slides technology in to automate the processes of a normal brokerage.

How do they make money? (Requested answer)

Robinhood makes money in many of the same ways as traditional online brokerages. These include:

- Collecting interest from customers who choose to upgrade to a margin account. We are testing margin in beta and will offer margin accounts later this year.

- Accruing interest from customers’ uninvested cash balances. It is important to note that our customers are not charged.

Robinhood has raised $16 million from Index Ventures, Ribbit Capital, Google Ventures, Andreessen Horowitz, Social Leverage, Box CEO Aaron Levie, Path CEO Dave Morin, Jared Leto, Snoop Dogg, and Nas, which gives us the freedom to focus on building an outstanding experience rather than short-term profits. (https://robinhoodapp.zendesk.com/hc/en-us/articles/202853769-How-does-Robinhood-make-money-)

In other words, they’re a tech company. They raise rounds of large sums of money to expand from interested investors to hope they can either monetize or get acquired.

What happens next?

If you enjoyed this story, please recommend or tweet it out!

Tweet me @IshanHaq or officialishan@gmail.com

Android version coming soon!

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