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Robinhood launches 3% checking account

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Re: Robinhood launches 3% checking account

#291

Post by dragonwriter »

mikeash wrote: post #230
deminature wrote: post #225

Earlier quoted context omitted.

I assume they're trying to break the inertia people have with major banks. There's no reason to change bank unless there's some substantial incentive like favorable interest rate to offset the hassle involved. I'm not sure there's an ulterior motive here other than customer acquisition.

Right, but that incentive is only substantial if you’re going to park a lot of money there, which is exactly the sort of customer they don’t want according to the comment I replied to.

> Right, but that incentive is only substantial if you’re going to park a lot of money there,

You are assuming that customers make this decision rationally; marketing very often leverages the fact that humans very often don't do that.

Re: Robinhood launches 3% checking account

#292

Post by y_molodtsov »

Aunche wrote: post #215
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…

> geeks who believe they have outmathed a financial firm should ask themselves "Are financial firms likely to be bad at math?" and "Are financial firms incapable of hiring their own geeks?" Moviepass was also bought by a financial firm... Come to think of it, they have many similarities. Both companies are basically handing out free money and it's unclear how they would make any profit. People speculate that both com…

Robinhood makes their revenue on rebate fees, it’s not illegal but considered shady by some people. Ordinary brokers generally don’t do that (although some might).

Re: Robinhood launches 3% checking account

#293

Post by fizgig »

tanderson92 wrote: post #255
fizgig wrote: post #65

Earlier quoted context omitted.

I know, right? I'm soooo tempted to hoard $100k with BoA for that 20% extra bonus to their crappy interest rate.

You joke, but a lot of savvy people hoard $100k with BoA through their brokerage in the form of ETFs specifically for the bonuses to credit card rates (and the free equity trades).

Yeah, I know. I'll probably roll over my 401k into an IRA at Merrill Edge for the free trades and 75% perk on their cash back cards.

I was just highlighting the horrible rates that banks currently provide in the customer's favor even if you are a loyal patron holding a substantial (for the vast majority of people) sum of money.

Re: Robinhood launches 3% checking account

#294

Post by [deleted] »

motivated_gear wrote: post #277
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…

It's amazing how many times I've seen people post losses in excess of $20,000 on r/wallstreetbets.

[deleted]

Re: Robinhood launches 3% checking account

#295

Post by kevin_thibedeau »

elliekelly wrote: post #84
SEJeff wrote: post #14

As a user of the Robinhood brokerage for all of my "fun investment money" I'm a fan of this. I do wonder how the big banks are going to respond however as this is blatantly a "shots fired" kind of event.

Oddly enough I suspect the result will be lobbying for stricter financial privacy regulations. Almost half of Robinhood's revenue is from selling data.[1] Big banks won't be able to compete on that front and most of the big players don't participate/make enough money on order flow sales that they'd miss it if it were prohibited. So the banks will do what they do best: lobby congress & regulators to legislate & regula…

You're data is already being sold when you spend so adding on your bank is just another drop in the bucket.

Re: Robinhood launches 3% checking account

#296

Post by y_molodtsov »

gruez wrote: post #270
jcoffland wrote: post #259

Earlier quoted context omitted.

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.

>The stock market is a zero sum game. If HFTs are making money then someone else's is losing it. But who's that "someone else"? It's not the robinhood customer, because they're getting at least the best price on NMS[1]. So what's the issue? Would you rather pay $10/trade so your trade gets posted directly to the exchange and the profit goes to some random investment bank or daytrader rather than the HFT firm? [1] htt…

In 2018 people like to scream about “selling their data” way too much.

Re: Robinhood launches 3% checking account

#297

Post by 09bjb »

mcv wrote: post #161
09bjb wrote: post #153

Earlier quoted context omitted.

Not an expert in this domain but I'll cover the basics: ecurities are a euphemism for stocks and similar. Banks have been loaning out the money you deposit since the beginning of time; it's how they make money. They don't keep all the cash that people have deposited on hand, which is why a "run on the bank" was problematic in the past. They basically keep enough cash around ("reserves") so that the average withdrawal…

So what does that mean here? Are you saying that the part of your money that the bank uses to invest, is not insured? If so, then what does the insurance for the remainder even mean? Money that the bank doesn't touch doesn't need to be insured, because it's always there. The whole point of such an insurance is to reimburse you in case the bank loses your money due to their bad investment. If that's not covered but on…

My understanding is that yes, you're not covered if the bank suffers losses and passes them on to you. The entire industry is one giant moral hazard due to complete lack of skin in the game on the part of the banks. They don't own the money and aren't responsible for catastrophic losses (see the '08 and previous bailouts), but they control it and keep the upside. You're right, that insurance sounds like garbage, but I haven't bothered to dig into the details. Caveat emptor!

"Own nothing, but control everything." -John D. Rockefeller

edit: good note from /u/snowwrestler below:

> > It's not the cash/securities that Robinhood holds as part of their business, it's the one they hold for you. You may well choose to hold 100% cash or 100% securities.

> If I'm holding 100% securities, a) SIPC offers me no protection from losses, b) I better be making more than 3% return, and c) I would not call that situation "a checking account."

Re: Robinhood launches 3% checking account

#298

Post by solaxun »

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....

Re: Robinhood launches 3% checking account

#299

Post by kevin_thibedeau »

y-c-o-m-b wrote: post #100

There is a wait-list of more than 45,000 people when you sign up for the checking. An email is sent out after you register and it says the feature arrives in early 2019.

But they're claiming each card design is in "limited" supply with ~650K each. Something doesn't make sense there. If they can't process 45K signups why have 3M cards up for grabs?

Re: Robinhood launches 3% checking account

#300

Post by del82 »

dixie_land wrote: post #163

I think folks are overthinking this. The math itself doesn't matter. Have you seen recent Robinhood commercials popping up on TV? Their whole business is to encourage folks that should not be day trading to day trade. Having your money parked there just facilitates knee-jerk-reaction and follow-the-crowd trading.

> Their whole business is to encourage folks that should not be day trading to day trade

See also E-Trade's "Don't get mad, get E-Trade" commercials[0], which are clearly intended to give people the impression that stock trading will make them Super-Yacht rich.

[0] https://www.youtube.com/playlist?list=PLHVKU2qFM7q2HuTv5RCU0...

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