> It’s not a scam it’s just a pretty mediocre broker with a fancy ui.
That's what it is. But what really matters is how it is perceived.
Their pitch is quite literally "We’re on a mission to democratize finance for all. At Robinhood, we believe the financial system should be built to work for everyone. That’s why we create products that let you start investing at your own pace, on your own terms." [1]
It's a lofty mission. And it does so in two major ways: (a) Building a platform - application, knowledge base,... - that simplifies trading stocks and (b) offering bottom pricing for brokerage. The idea is to get as many people to the stock market as fast as possible.
RH saw an gap in the market for financial brokerage and took a plunge.
Their business model isn't that different from other brokers: capturing as much trading volume as possible. However, instead of making money off commissions, they earn millions on the back-end by charging fees on routing orders, or making interests off of cash payments in customer accounts.
> It’s hard to say they weren’t impactful, though we can disagree on the positivity of the impact itself.
There are two big issues with RH.
The first is that it only offers the bare minimum of information on financial trading on their knowledge base and through their app. In fact, on their website, the "risk disclosure" link on their first sales pitch is just a pop up with literally just 1 line: "Investing involves risk, including the loss of capital. Investors should consider their investment objectives and risks carefully before investing." [2]
Sure, the application provides restrictions through automated profiling, but at no point do you talk to a knowledgable human up front who can assess whether you should be using RH, let alone trading on the financial markets, in the first place.
At the end of the day, no matter how this gets spun, the trader is - quite literally - left to their own device to decide whether or not trading on RH is a good idea in their specific situation.
The second is their brand / image. RH gained some brand notoriety as it was first adopted by a young population with a bit of cash on hand but not enough to invest in anything meaningful or stable like a home or a family. The "democratizing financial markets" pitch resonates with an audience / generation whose general outlook on the world and the future isn't all that positive to begin with.
Over the past year, RH gained further traction through the fundamental economic and social changes caused by the pandemic. A community like WSB embraced e-brokers like RH and further boosted their notoriety / brand image / narrative. Moreover, an online community like WSB is another clear example of like-minded people clustering together and how a shared collective identity galvanizes in a surprisingly short time frame.
Over the past months, RH lost control over the public's perception, partly by their own pitch, partly because of the sudden change in circumstances. This wasn't an issue as long as the nature and the volume of the trading fitted within the existing assumptions of other, traditional / incumbent stakeholders in the financial markets.
That changed over the past 2 months as speculative investing via RH, WSB, online ivesting,... went "viral" overnight.
But that's all it really did.
RH is just one of many more actors that provide access to the markets. And their audience of day trading investors represents only a tiny fraction of the total volume of trading on the financial markets. RH had about 13 million users in 2020. [3] Consider the hundreds of million of people and companies who are vested in the financial markets through pension funds, mortgages, household debts, business loans, saving accounts and so on.
An e-broker like RH with their particular brand, the audience that it accrued and the emerging culture / identity could only become as popular as it did because of inequities and sudden shifts elsewhere in the economic system. Their story lays all of that bare for everyone to see, including policy makers and finanicial regulators.
Personally I see this story more as an expression of a particular zeitgeist rather then a driver in itself for fundamental long term change.
[1] https://robinhood.com/us/en/about-us/
[2] https://robinhood.com/us/en/about/#our-products
[3] https://www.businessofapps.com/data/robinhood-statistics/