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Is it possible, that Robinhood is using high interest rate checking accounts not to make any money directly from them, but to encourage people to keep all their
by krn 8y ago
Is it possible, that Robinhood is using high interest rate checking accounts not to make any money directly from them, but to encourage people to keep all their spare money one-click away from its investment products? In that case, checking accounts become just a business cost to Robinhood.
- cobookman 8y agoOr they use said money to buy bonds and/or start offering mortgages...etc.
- drharby 8y agoI feel likr thats implied
- jpmoyn 8y agoWell like any bank they are investing the money held with them.
- davidlee1435 8y ago> to make any money directly from them > to encourage people to keep all their spare money one-click away from its investment products These are not mutually exclusive. Robinhood could write this off as CAC that's mitigated by investments into (relatively) safe and low-yield investments. Robinhood could spend a million on Google/FB ads, or they could have an X% chance of losing an amount equal to (3%-bond yield) where X is reasonably low. The (mitigated) loss gives them access to capital and access to customers. If the 3% is permanent, there is no reason for anyone to store their money in a different checking account, as inflation will eat into their savings if those savings aren't invested. Extremely smart move on their part.
- snowwrestler 8y agoChecking accounts are loss leaders for most banks, even with low interest rates. And big brokerages have offered this type of account for decades. It's usually called a "cash management account" and works just like a checking account--takes direct deposit, provides checks and an ATM card, etc. Robinhood's innovation might simply be in calling it a "checking account" so the interest rate looks huge (it's actually small compared to expected investing returns) and marketing it to young people who are suspicious of big financial companies.
- freejak 8y agoI'm curious how they can even get away with calling it a checking and savings account.