Tech Talk — Robinhood: Investing Made Easy Using Tech (And what big banks can learn)
Robinhood is changing the game in trading by making it accessible to the masses — if you have a smartphone and a little capital (there is no minimum) you can buy and sell stocks through their mobile app. You don’t have to pay per trade so it takes out the middleman and, because it’s a mobile app, you can buy and sell on the go!
Robinhood is perfect for the first-time investor. With a little time, a little money, a wealth of curiosity about the stock market and the goal of growing investments — this app gives the small time investor the potential to build a portfolio over time. Initial set-up asks for your investment goals and timelines, and asks a few questions to help you get started, along the lines of “What would you do if you lost 50% of your value share in a day?” This helps Robinhood understand your goals and risk appetite — all in the first page of the application. It’s not quite a one- stop investment shop, but it’s a good place to start.
How do they do it? Apps are relatively inexpensive to create and maintain, and don’t require a brick and mortar location and thousands of employees. They know that it’s all about the product, and so they’ve created one that serves a very specific purpose very well — to trade stocks for free, while also offering other premier products. The user interface is simple and clean. It makes investing — buying, selling, and watching the stock market feel — easy.
What Financial Services Institutions Can Learn
It’s all about the product. Robinhood solves two big specific problems — investing is expensive when you have to pay per trade, and inaccessible if it can’t be done on a mobile device on the go. By creating an app that makes it easy — and cheap — to invest, they’ve opened themselves up to a demographic that was not previously investing, namely millennials. This is how FinTechs and InsureTechs are disrupting the market — they’re going after extremely specific markets/ demographics and creating products that are easy to use. And it’s working for now — but millennials will grow up, and their financial needs will change over time. Who will have the best products and services for them then?
Who It’s For
The effect on the end user is profound. It’s empowering to have access to something that previously felt so inaccessible. And building a portfolio, even if you’re starting with fifty bucks and a prayer, is great for a lot of people. It’s best for new investors who want to learn about trading with ease, are happy to only trade stocks and ETFs (Exchange Trade Funds), and perhaps have some time and interest in doing research outside of the app. This is one of the only complaints that I have about Robinhood — while it provides a great free service, it could go a step further and provide more education or tools for new investors.
What Robinhood — and Financial Services Institutions — Can Fix In The Future
Investing in and maintaining a portfolio needs to be part of a larger financial plan. Robinhood, while a great first step, is not a comprehensive financial manager or advisor. When you cash out your investments, it doesn’t link to an IRA, 401k, or give you any information on retirement. It doesn’t give you any info on savings, or your mortgage, or any other financial need that you have. In the future, it would be great to see apps like Robinhood work seamlessly with other money managing apps to aid the user on every part of their financial journey. Investing is just one piece of the puzzle — so let’s find a way to see the entire picture. For large Financial Services Institutions, collaborating with FinTech start-ups like Robinhood might make this future a reality faster.