Name: Insights: Robinhood’s Crypto Trading Crystalizes Its Vision For A No-Fee Future
Uploaded: 2020-03-10
Duration: 4 min 12 s
Description: Robinhood Co-CEO Vlad Tenev chats about the commission-free service, and why no-fee will be the model of the future. (June 2018)

[MUSIC PLAYING] SPEAKER 1: We're an investment platform. We allow people to trade US equities, options, and cryptocurrencies commission free, so no portrayed charges on all three of those. We're available on mobile and on web as of late last year in the US. SPEAKER 2: You guys have said that you plan to offer banking services in the future. I think you've even said you hoped to offer everything that Bank of America offers, and you guys just raised $363 million series D round valuing it at $5.6 billion. So you've been compared to the Amazon of financial services, but do you really want to be a bank? I mean, is that what you see yourselves becoming in the future? SPEAKER 1: Well, the way we think about it is we want to solve customer problems and the precise regulatory structure. We figure out around the problem. So it became pretty clear at first when we wanted to launch the stock trading product that we had to be a FINRA registered broker dealer. So we went in and got those licenses. But we didn't start saying, OK, let's be a FINRA broker dealer. What can we do now that we have that license? It started out by understanding that customers are getting ripped off in investing and trading. They're paying up to $10 a trade, sometimes even more. There's high account minimums. And the user experience, I mean, these services effectively haven't changed for 10, 20 years when you look at discount brokerages. And we took that approach organically to options trading, where customers are getting charged even more for making options trades. You get charged twice per transaction in two different ways, and some customers came to us and said, well, we're paying thousands of dollars a day in trading fees. So they wanted that product out of us. And we figured out how to make that happen. We don't intend to make very much money on it at all for the foreseeable future. We intend to operate it as a break even business. And the thinking behind that is that what we're really doing is building an ecosystem. Right now, the products are investing products, so crypto slots in very nicely alongside the 10,000 plus other instruments that people can trade. And we think of monetizing a customer across a wide variety of different products in our ecosystem, including Robinhood Gold, which is the most direct subscription pricing model. SPEAKER 3: So you attract new customers through their very good prices on crypto and then up sell them on other things. SPEAKER 1: Exactly, and we saw a lot of that happening. When we announced crypto, we had some of our biggest days ever where a lot of new customers joined the product and-- SPEAKER 2: You said hundreds of thousands of customers on some some days. SPEAKER 1: Yeah. Exactly. And those customers actually started investing in many other things, not always crypto. They were investing in options and equities and a lot of them subscribed to Robinhood Gold, so we're looking at crypto as a one way for customers to actually see the value prop of our broader product. I mean, we're selling them financial services, and they can find out about us depending on what they're most interested in. For some customers is crypto. Others is they want to invest in a stock for a company that they care about. SPEAKER 2: It's pretty unusual for a brokerage of any sort to not charge any commission fees. I mean, that has been the bread and butter of the business for years and years. And other than you guys and Corbin Hood, which is-- before you guys were in crypto, the crypto knock off of Robinhood. Why is the no fee model so important do you think? SPEAKER 1: I definitely think it's where the industry is going. I think-- I mean, if you look at our business, I mean we've been able to make it work, because the cost is very, very low in offering these services. It wouldn't have been possible 10, 20 years ago, for example, because markets weren't fully electronic. 

Insights: Robinhood’s Crypto Trading Crystalizes Its Vision For A No-Fee Future

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They believe no-fee will be the model of the future.

Robinhood Crystalizes Its Vision For A No-Fee Future

Robinhood Co-CEO Vlad Tenev chats about the commission-free service, and why no-fee will be the model of the future. (June 2018)

We're a Nen vestment platform. We allow people to trade US equities options and crypto currencies Commission free. So no portrayed charges on all three of those were available on mobile and on Web. As of late last year in the U. S. You guys have said that you plan to offer banking services in the future. I think you said you hoped offer everything that Bank of America offers on you guys. Just raised $363 million series B round valuing Robert A 5.6 billion. So you've been compared to the Amazon, A financial service. But do you really want to be a bank? Is that what you see yourselves becoming in the future? Well, the way we think about it is we want to solve customer problems and the precise regulatory structure. We sort of figure out around the problem. So it became pretty clear at first when we wanted to launch the stock trading product that we had to be a thin row registered broker dealer. So we went in and got those licenses. But we didn't start saying, OK, let's be offender. A broker dealer. What can we do with now? that we have that license. It started out by understanding that customers are getting ripped off in investing and trading. They're paying up to $10 a trade, sometimes even more. There's high account minimums and the user experience. I mean, these service is effectively haven't changed for 10 20 years when you look at discount brokerages and we took that approach kind of organically toe options trading, where customers are getting charged even more for making options trades. You get charged twice per transaction in two different ways, and some customers came to us and said, Well, we're paying thousands of dollars a day in trading fees So they wanted that product out of us and we figured out how to make that happen. We don't intend to make very much money on it at all for the foreseeable future. We intend to operate it as as a break even business. And, um, the thinking behind that is that what we're really doing is building an ecosystem. Right now, the products are investing products so crypto slots in very nicely alongside the 10,000 plus other instruments that people can trade, and we think of monetizing a customer across a wide variety of different products in our ecosystem, including Robin Hood Gold, which is sort of the the most direct subscription pricing. Attract new customers to the very good prices on Krypton and sell them on other things. Exactly. And we saw a lot of that happening when we announced crypto we had some of our biggest days ever wear a lot of new customers joined the product and hundreds of thousands of customers on Sundays. Yeah, exactly. And, uh, you know, those customers, actually, you know, started investing in many other things, not always crypto. They were investing in options and equities, and a lot of them subscribed a Robin Hood gold. So, um, we're looking at crypto as, ah, one way for customers to actually see the value prop of our broader product we're selling them. Financial service is, and they can find out about us depending on what they're most interested in for some customers and crypt crypto others, they want to invest in a stock for a company that they care about. It's pretty unusual for brokerage of any sort. To not charge any commission season mean that has been the bread and butter of the business for years and years. Um, you know another than you guys in common hood, which is, you know, before you guys were in crypto crypto knockoff of Robin Hood. Why's the no fee model? Um so important? Do you think I definitely think it's where the industry is going? I think, uh I mean, if if you look at at our business, we've been able to make it work because the cost is very, very low in offering the service is it wouldn't have been possible 10 20 years ago, for example, because markets weren't fully Elektronik.