Robinhood Is Eating E*Trade's Lunch, Millennials

People evidently prefer trading for free to trading for not-free.
Author:
Publish date:
Updated on
Millennials

Millennials

Robinhood, the brokerage app that aims to “democratize the American financial system” by encouraging millennials to day-trade, announced Wednesday that it's taking a momentous step: It's moving from your pocket to your lap. No longer will its users be confined to the 4-inch screens of their iPhones; now they can make commission-free trades on overhyped IPO stocks from the comfort of their MacBooks.

Called “Robinhood for Web,” the platform gives users the newfound ability to compare stocks to their peers, access analyst ratings, and view an Amazon-style “others also bought…” for companies they own. “We noticed you like Snap...”

But the real news is in the data Robinhood released:

Launched in 2015 and led by Co-CEOs Baiju Bhatt and Vlad Tenev, Robinhood also announced it passed three million users and over $100 billion in transaction volume. Investors on the platform have saved over $1 billion in commission fees by choosing Robinhood.

For comparison, E*Trade, which has been around since 1982, had about 3.6 million brokerage accounts as of its most recent reporting period. In the two years Robinhood has been online, it's amassed the equivalent of more than four-fifths of E*Trade's customer base.

There's an obvious economic reason behind Robinhood's success: free is better than not-free. Robinhood offers commissions-free trading for ordinary users. That's subsidized by the $10-monthly Robinhood Gold, which gives users margin and after-hours trading privileges. That, and a hefty pile of VC cash, is what allows Robinhood to fulfill its lofty mission to “shrink the gap between the ‘haves’ and the ‘have nots.’”

Which gets us to the non-economic reason a startup like Robinhood can find itself E*Trade's equal in such a short period of time. For all the fun we've had at Robinhood's expense, its techno-utopian Occupy-lite public image is much closer to the mythical millennial id than E*Trade's branding, which is...whatever this is:

e*trade

The most cynically exploitative capitalist and the most ideologically rigid Marxist would probably come together in hearty agreement that this dude fucking sucks. Even that guy doesn't want to be that guy. Sure, there's probably some demographic drawn to “I got lucky on stocks and blew it all on a yacht”, but it's definitely not the dominant tendency among the rising tide of young investors.

Related

Maybe E*Trade Should Stop Giving Four-Year Contracts To Its CEOs

Like the four who held the job before him since its, er, difficulties began five-and-a-half years ago, Steve Freiberg did not do a particularly good job running E*Trade. But he's been compensated handsomely for facing the wrath of an angry Ken Griffin before getting a pink slip in August.