How Robinhood Captures Beginner Investors

Robinhood led the way for zero commission trading. It helped bring in a new generation of investors to the stock market. The Covid-19 pandemic and stay-at-home orders helped the trading app add 3 million users in the first quarter of 2020. “The Robinhood Trader” quickly became synonymous with retail trading. The company has made the stock market more accessible to millions of users but not without complications.

The beginning of 2020 created a unique moment for retail trading: Increased market volatility, stay-at-home orders, and zero commission fees across all trading platforms created a surge in activity and an increase in first-time traders.

These first-time traders, many in their 20s and 30s, found the stock market accessible. High prices had kept many on the sidelines for years. As sports events were canceled, sports betting was replaced with stock trading.

Stocks went to historic lows, and many young investors opened their Robinhood app. Robinhood has been the fintech darling of Silicon Valley, founded by Vladimir Tenev and Baiju Bhatt in 2013. The app has amassed 13 million user accounts and led the way for zero-commission fee trading. In no time, it has created brand awareness and popularity unlike that of the legacy brokerages such as Charles Schwab and Fidelity, or its app-first competitors like Webull and Dough.

Users download Robinhood for its simplicity and ability to start trading in a matter of seconds. For the first time, young investors felt they had the power to trade and make their own decisions on how to invest their money. The app came from Silicon Valley, not Wall Street, and its frictionless interface and ‘game-ified’ features quickly captured young, first-time stock traders.

In a Dec. 4, interview on CNBC’s “Mad Money,” Bhatt told Jim Cramer, “The thing that makes Robinhood really unique is that it’s incredibly efficient in the way that it operates because we’re from the ground up a technology company which allows us to build really modern systems that have our systems be much more automated much more stable by just having code execute.”

As a fintech leader and with such large growth, Robinhood has met lots of challenges. It’s battling the SEC, lawsuits, and growing competition from traditional Wall Street firms.

Watch the video above to find out how Robinhood plans to keep up with the demands of its users — and with the growing attention of regulators.

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How Robinhood Captures First Time Investors