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It's a brokerage account where you buy US Treasuries but also made liquid via a deal with Mastercard and branded as a chequing account It's kinda smart - but i

It's a brokerage account where you buy US Treasuries but also made liquid via a deal with Mastercard and branded as a chequing account It's kinda smart - but i'm curious how they settle some of the backend with daily transactions moving in and out - if they're actually making bond purchases/sales with each transaction, for each customer each day, or for all customers each day etc. edit: fwiw I think the entire premise of these new products and 3% paid (way over what treasury bonds pay) is as a loss leader to the gambling that is a lot of the "investing" done by Robinhood users. Must be temping to buy some Tesla options once you have a chequing account in the same app. edit 2: their fine print: > Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account. so they're saying they might market it as a bank account, but it isn't

DennisP 8y ago
I'm not sure what you mean by "way over" but 6-month t-bills are paying 2.5% right now. It's probably a loss leader but since they'll make money from merchant fees on debit cards, it might not be that much of a loss.
- wp381640 8y ago
  I doubt they'd be able to 100% buy tbills at that maturity length (hence curiosity on what they're doing on the backend here), but even assuming 2.30~ average plus whatever Mastercard kickback is negative 50-70bp is still a hell of a margin to make on selling consumers tbills and not raising funds for your own investment activity edit: a better way to explain it - we'll give you tbills at 3% p.a and let you pull out/in whenever you want and handle the rest is a hell of a business model without the rest of the story
  - whitepoplar 8y ago
    My guess is: they're investing in 6-month T-Bills, they're expecting rates to rise over the next 6 months to 1 year, they're covering the remainder out of pocket, and by doing this they're capturing the lion's share of their target market before their competitors do. In addition, I'm guessing their AUM are low relative to their popularity. Lots of millennials may be very vocal about Robinhood, but may not have the quietly massive asset balance that boomers have, tucked away in Schwab, Fidelity, or Vanguard. This could be a land grab for AUM to support future VC rounds, an acquisition, or an IPO.

DennisP 8y ago

I'm not sure what you mean by "way over" but 6-month t-bills are paying 2.5% right now. It's probably a loss leader but since they'll make money from merchant fees on debit cards, it might not be that much of a loss.

wp381640 8y ago
I doubt they'd be able to 100% buy tbills at that maturity length (hence curiosity on what they're doing on the backend here), but even assuming 2.30~ average plus whatever Mastercard kickback is negative 50-70bp is still a hell of a margin to make on selling consumers tbills and not raising funds for your own investment activity edit: a better way to explain it - we'll give you tbills at 3% p.a and let you pull out/in whenever you want and handle the rest is a hell of a business model without the rest of the story
- whitepoplar 8y ago
  My guess is: they're investing in 6-month T-Bills, they're expecting rates to rise over the next 6 months to 1 year, they're covering the remainder out of pocket, and by doing this they're capturing the lion's share of their target market before their competitors do. In addition, I'm guessing their AUM are low relative to their popularity. Lots of millennials may be very vocal about Robinhood, but may not have the quietly massive asset balance that boomers have, tucked away in Schwab, Fidelity, or Vanguard. This could be a land grab for AUM to support future VC rounds, an acquisition, or an IPO.