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Robinhood launches 3% checking account

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Re: Robinhood launches 3% checking account

#501

Post by brobinson »

kevindong wrote: post #341
philip1209 wrote: post #332

I just spent 3 months in London, and it's crazy how Monzo seems to have taken the market. Almost everybody seems to be paying with a Monzo card, regardless of age. Asking around, I consistently heard that Monzo's competitors like Revolut are going to be a future case study in scaling before great product/market fit. I don't know how many people have Revolut accounts, but nobody seems to be using their cards in public…

> My benchmark is Charles Schwab Bank, which offers free ATM fees on any ATM, anywhere. It's what many millennials that I know use. But, it's a bad product and not very user-friendly. Why do you say it's a bad product? I use Schwab as my main account and it works great for me.

Schwab is excellent. Their "high-yield" (lol) investor checking/brokerage account is a good offering due to no minimums, unlimited foreign ATM fee rebates, unlimited checks, etc. Their customer support is amazing. Three rings and a human picks up the phone.

My direct deposits go there, but I moved all my investments over to Interactive Brokers since Schwab doesn't offer (to my knowledge) portfolio margin and Schwab's margin rates are usurious.

Re: Robinhood launches 3% checking account

#502

Post by Havoc »

superfrank wrote: post #479
Havoc wrote: post #474

Earlier quoted context omitted.

>down time Look at the comments I linked to. That's not downtime. People's transaction history is being rolled back. Some people still have fake positions showing. Another had all his positions sold. Another got bonus buying power. The inconsistencies in the comments are striking. Looks like a complete lotto of what happened to people's accounts. That inspires zero in their back end processes. >makes it sound like RH…

>makes it sound like RH was robbing them at gun point. >It pretty much is. It really really isn't. This is the type of exaggeration why I find that sub insufferable. Robinhood's stability issues are well known and normal for a fast growing, early stage startup. You as a user need to understand the limitations of the platform and incorporate them into your trading strategy. Swing trading options on RH is like carving…

>stability issues are well known

This isn't someone startup app going wonky that needs a server reboot. It's peoples money & expectations for reliability are much higher. Justifiably so.

>limitations of the platform

This isn't a 'limitation'!?!?! Their system crapped out and caused chaos

>Swing trading options on RH is like carving a turkey with a chainsaw

Agreed. This isn't about which broker is best for what strategy. This is about a broker failing to fulfil its core purpose - reliably executing orders

Re: Robinhood launches 3% checking account

#503

Post by barrkel »

jcoffland wrote: post #259
abuckenheimer wrote: post #250

Earlier quoted context omitted.

Yes HFT buys trade flow from robin hood because they make more money executing against it but that's not actually to the detriment of the people on the robin hood app. The main way HFT firms make money is by making a market, they offer to buy and sell stocks cheaper than anyone else and get paid by people crossing the spread and sometimes exchange fees. The reason robinhood trade flow is valuable to HFT firms Isn't b…

The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. The other traders who's trades are closest are the most likely losers. HFTs will tell you what a great liquidity service they provide but they are doing nothing more than using the equivalent of insider information to skim the cream off the top.

Stocks are not zero sum. In theory, their value is based on future income. Information about the future is what most affects stock prices, because it changes expectations around future income. Even with no transactions in a stock, offer price can continue to rise because of these expectations, and it represents real increase in wealth to people who own the stock, no transactions necessary. When offer price rises enough to tempt someone to sell then you have an estimate of the market value.

Re: Robinhood launches 3% checking account

#504

Post by cbdumas »

philip1209 wrote: post #435
kevindong wrote: post #341

Earlier quoted context omitted.

> My benchmark is Charles Schwab Bank, which offers free ATM fees on any ATM, anywhere. It's what many millennials that I know use. But, it's a bad product and not very user-friendly. Why do you say it's a bad product? I use Schwab as my main account and it works great for me.

I love Schwab's checking account product because it's highly functional. But, I don't think that it has mass-market appeal. It appeals to a rational buyer, not an emotional one. The opportunity here for a startup bank is to replace credit card spending in the USA. The potential earnings are huge if you can get consumers to spend on a debit card instead of a credit card (because the rake is higher). To make a checking…

What incentive would I have to use a well branded debit card over a credit card that gives cash back?

Re: Robinhood launches 3% checking account

#505

Post by notyourday »

pascalxus wrote: post #439
mikeash wrote: post #218

Earlier quoted context omitted.

Why would they expect this account to be used as a high-velocity, low-balance account rather than a park-your-savings account, given the rate? I agree that the high rate is reasonable in that scenario, but the high rate is also actively fighting to ensure that scenario doesn’t happen. I don’t see people here thinking that Robinhood is bad at math. They’re all asking, “what’s the catch?” Because it sure seems like the…

here the catch, I believe: 1. it's ensured by SIPC, not FDIC, so it's not as safe. 2. They're going to lower that 3% rate down whatever all the other banks are at (2%) in a couple of years, unless the interest rates catch up to their higher rate, which they are expected to do in about 2 to 3 years: at that time, 3% will be roughly the norm for the highest interest savings accounts. I remember the days when Citibank w…

Cash balances ensured by SIPC are safe to the coverage amount. 100% safe actually.

Re: Robinhood launches 3% checking account

#507

Post by alexhutcheson »

solaxun wrote: post #298
patio11 wrote: post #115

For folks trying to understand this, some context which may be useful: Checking accounts are loss leaders virtually everywhere, the exception being smaller community banks. Their primary revenue stream was, once upon a time, net interest income, but these days due to the extremely low interest environment and alternate sources of funding the revenue stream is more weighted towards fees (primarily NSFs, although that…

Why does everyone keep referring to checking accounts as "loss leaders"? They are more like "income leaders" - the banks are funding themselves at basically 0% and then earning the spread on whatever they invest in....

The banks incur lots of operational expenses processing transactions, paying for an ATM network, handling customer support calls, dealing with fraud, etc.

Re: Robinhood launches 3% checking account

#508

Post by zackmorris »

matwood wrote: post #449
OscarCunningham wrote: post #414

Earlier quoted context omitted.

A gain of 2% a day over 200 days actually compounds to 5148%, not a mere 400%.

True. I was trying to give some benefit of the doubt, since 2%/day compounded is obviously ridiculous.

Good catch, that could be some selective memory on my part. What I remember most is that it was very easy to make 2% on a good day, and we did that over the course of about 6 months or a year, trading about every other week and pulling the money out to sit idle on weeks that we were too busy to trade. I remember there were several times as many days that gained 5% (trading 2-4 times each day) than days that lost 5%.

One of the charts in etrade said we were up $40k over about a 4 month period and my dad had about $50k in play, trading on margin so working with about $100k. So the real return was more like 80% over 4 months, so I guess 240% for a year although I don't know if I'm doing that math right.

My biggest fear most days was honestly that there wasn't going to be enough volatility for the stock to move, meaning we threw away $7 to $28 on trading fees. I was moving furniture at the time and only made $80 on a good day so that was a lot of money for me then.

Re: Robinhood launches 3% checking account

#509

Post by sonnyblarney »

Derek_MK wrote: post #446
sonnyblarney wrote: post #264

Earlier quoted context omitted.

" Their whole business is to encourage folks that should not be day trading to day trade" Also using the ridiculously upside down moral convention that they are somehow 'the good guys defeating the system' i.e. 'Robin Hood'. "We wanted to do something after occupy Wall Street, you know. Something real. So, how about, get all the young people to, you know, put their money into Wall Street" is basically their 'storyboa…

Yeah, the younger crowd doesn't trade, not because "the maaaan" is keeping them from it, but because it's a very complicated way of making money, and they typically don't want to learn how to do it right. What this startup is doing is telling the younger crowd that it's the former, while also saying "Look how easy this is!" and deliberately oversimplifying complex systems.

It's not a matter of complexity, it's a matter of power, or rather, information asymmetry.

Buying stocks isn't really investing, it's more akin to gambling like Poker, with all other investors at the table.

Many of those investors have massive computers, R&D firms, brilliant minds, 'inside information', and relationships with those companies and CEO's.

So what 'millenial' is going to trade better than those?

Zero. Or at least in the long run.

The only way to 'beat the man' is to have more knowledge than Wall St. and that is extremely rare.

So what 'Robin Hood' does is sign up fish to feed to sharks.

It might make sense to put a chunk of savings in a broad array of stocks (some in bonds, some in gold, some in cash etc.) - but 'trading' against Wall Street is about as smart as playing Poker against the best in the world thinking you're going to win.

Re: Robinhood launches 3% checking account

#510

Post by throwawaymath »

danellis wrote: post #442
deminature wrote: post #252

Earlier quoted context omitted.

Perhaps true, there's been an opening for a 'cool' millennial-oriented financial institution for a while now, so perhaps fewer customers will drop off than expected.

> there's been an opening for a 'cool' millennial-oriented financial institution for a while now I think Simple was supposed to be that. I wonder how they'll respond to this, given that they only recently moved to 2% ($2k minimum).

Judging by their recent activity, Simple won't respond well at all. They've been in a downward spiral for the past few years post-acquisition by BBVA. All the original founders have left amidst a revolving door of executives, and the company has struggled to launch new products and innovate beyond their initial budget features.
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