Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Robinhood Will Retool Checking Product Following Scrutiny

bloomberg.com

Post reply on HN
Print view View original

31–40 of 103 posts

Re: Robinhood Will Retool Checking Product Following Scrutiny

#31

Post by elliekelly »

Lazare wrote: post #23

I think it's becoming increasingly clear what happened. As whitepoplar noted here ( https://news.ycombinator.com/item?id=18691477 ) other similar services are FDIC insured because the funds are swept into FDIC bank accounts behind the scenes. But FDIC insured bank accounts pay very, very little interest, and Robinhood wanted to offer a high interest rate. Their innovation was, instead of sweeping the funds into FDIC…

Another important distinction is that, under the law, accounts can be either a demand deposit account (typical bank accounts like checking or savings) or a brokerage account. They can't be both. As the name suggests, Financial institutions _must_ allow customers to withdrawal some or all of the funds in a demand deposit account at any time, without penalty and without requiring prior notice. Because of the time it takes for the settlement of securities transactions brokerage accounts don't have the same obligations. If you put $100 in a traditional checking account and you need it today you have the right to access it immediately (assuming the bank is open). If you put $100 in a Robinhood account and you need it today you might have to wait three.

When Robinhood calls a product a "checking" account that fundamental concept of immediate access to your money is implied to consumers but looking at their site there are all kinds of restrictions around dollar amount and frequency of withdrawals.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#32

Post by mbesto »

As noted by @asanwal[0] this can be seen as both deceptive and smart. Here's the reality - when you get a $6B valuation, you are accepting VC-fueled growth fate, which means you are on a tightrope to grow at all costs. It's a gamble, but if executed successfully will lead to exponential growth and thus outsized investment returns.

Here's my personal problem - there is much needed punitive damages for this type of behavior. Until we have people in power that understand why these situations (deceptive advertising) are problems, then, well, let's be honest, we're gonna see the Wild West flourish full of cowboys and Indians.

[0] - https://twitter.com/asanwal/status/1073945507100270592

Re: Robinhood Will Retool Checking Product Following Scrutiny

#33

Post by SEJeff »

elliekelly wrote: post #29
alexandercrohde wrote: post #22

Earlier quoted context omitted.

I'm confused. Are we saying that robinhood is the scrappy kind or not? I see no reason to be hostile toward them. I think they're undercutting buy fees. It sounds like they announced something and had to retract, but that doesn't hurt anyone. And I bet whatever they do come up with will put pressure on banks to be more competitive.

> And I bet whatever they do come up with will put pressure on banks to be more competitive. More competitive how, exactly? Robinhood isn't "innovative." They haven't done anything fundamentally different from any other financial institution except skirt regulatory protections for retail investors. You'd think by now we would learn to ask "if this platform is free, how are they making their money?" Robinhood is cutti…

As explained to you in another HN post. HN makes their money via their margin accounts aka Robinhood Gold, and by selling their order flow, like many other brokerages do. It results in better execution for the clients (like myself) and a tighter spread. If it means I get a better price and someone else gets first dibs at the buy or sell side, I honestly don't care. You can use limits if you worry about getting "ripped off by the man".

Re: Robinhood Will Retool Checking Product Following Scrutiny

#34

Post by JumpCrisscross »

mbesto wrote: post #32

As noted by @asanwal[0] this can be seen as both deceptive and smart. Here's the reality - when you get a $6B valuation, you are accepting VC-fueled growth fate, which means you are on a tightrope to grow at all costs . It's a gamble, but if executed successfully will lead to exponential growth and thus outsized investment returns. Here's my personal problem - there is much needed punitive damages for this type of be…

> there is much needed punitive damages for this type of behavior

I'm a fan of Robinhood. But this calls for more than a slap on the wrist. Not punishing someone misrepresenting their FDIC or SIPC insurance status is a horrible precedent. Not only does it show a green light to scammers. It also corrodes the protective, anti-run value these programs provide to depositors and investors.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#35

Post by dvtrn »

village-idiot wrote: post #25
Godel_unicode wrote: post #20

Earlier quoted context omitted.

You've never seen someone screw something up, apologize for screwing up, and promise to do better next time? I find that hard to believe.

It’s more surprising when everyone lets them try a second, third, or fourth time

Has Robinhood here slipped up multiple times like this? I'm asking as someone who's only heard of the product, never tried it, doesn't look remarkably interesting to me/doesn't fill a financial need I have, never gave it much thought aside from this latest fuss.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#37

Post by elliekelly »

dawnerd wrote: post #28
whitepoplar wrote: post #11

Earlier quoted context omitted.

Not quite. Fidelity CMA accounts are brokerage accounts and thus cannot offer FDIC insurance because Fidelity is not a bank. Fidelity accounts offer SIPC insurance. However, Fidelity's trick is to sweep all cash into third-party FDIC-insured bank accounts behind the scenes. This yields several benefits: 1) Practically speaking, it offers the exact same FDIC insurance as a real bank account, because your money is bein…

I would be interested to see how they and others go about setting up mass numbers of accounts. I imagine it’s probably something boring like a partnership.

https://en.wikipedia.org/wiki/Promontory_Interfinancial_Netw...

On any given night your dollars are spread out at banks all over the country. Likely at tiny little community banks that you've never even heard of. It's pretty impressive how banks manage to maximize FDIC insurance.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#38

Post by elliekelly »

SEJeff wrote: post #33
elliekelly wrote: post #29

Earlier quoted context omitted.

> And I bet whatever they do come up with will put pressure on banks to be more competitive. More competitive how, exactly? Robinhood isn't "innovative." They haven't done anything fundamentally different from any other financial institution except skirt regulatory protections for retail investors. You'd think by now we would learn to ask "if this platform is free, how are they making their money?" Robinhood is cutti…

As explained to you in another HN post. HN makes their money via their margin accounts aka Robinhood Gold, and by selling their order flow, like many other brokerages do. It results in better execution for the clients (like myself) and a tighter spread. If it means I get a better price and someone else gets first dibs at the buy or sell side, I honestly don't care. You can use limits if you worry about getting "rippe…

I understand where their revenue comes from. But if they're doing the same thing as every other bank and not charging for trades what's making up the difference on their bottom line? It's not income. So it must be that they're avoiding costs that the rest of the industry is incurring. Like the cost of compliance.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#39

Post by jnwatson »

elliekelly wrote: post #29
alexandercrohde wrote: post #22

Earlier quoted context omitted.

I'm confused. Are we saying that robinhood is the scrappy kind or not? I see no reason to be hostile toward them. I think they're undercutting buy fees. It sounds like they announced something and had to retract, but that doesn't hurt anyone. And I bet whatever they do come up with will put pressure on banks to be more competitive.

> And I bet whatever they do come up with will put pressure on banks to be more competitive. More competitive how, exactly? Robinhood isn't "innovative." They haven't done anything fundamentally different from any other financial institution except skirt regulatory protections for retail investors. You'd think by now we would learn to ask "if this platform is free, how are they making their money?" Robinhood is cutti…

I don't know what you're talking about. Their SIPC insurance for their regular investors is safe.

Re: Robinhood Will Retool Checking Product Following Scrutiny

#40

Post by jnwatson »

jakebasile wrote: post #6
hartator wrote: post #5

Don't want to be too salty, but it seems an attempt to shut the 3% checking threat down by big institutions.

It doesn't seem like that to me. It seems like they tried to sidestep the required regulatory hurdles to offer a real checking/savings account and got a wake up call.

Sure, but they just weren't sophisticated enough. It isn't wrong, they just need to go through some more steps, like Fidelity. It will be a non-issue in 60 days.
Post reply on HN