Robinhood brings its stock-trading platform to the U.Ok., its first worldwide market

We knew it was coming, however stock-trading platform Robinhood is lastly open for enterprise within the U.Ok. — its first worldwide market since debuting within the U.S. greater than a decade in the past.

Robinhood is granting early entry to the app beginning immediately for individuals who be a part of the waitlist, with issues steadily opening as much as everybody throughout the U.Ok. a while in early 2024.

The Menlo Park, California-based firm started its U.Ok. launch prep practically 5 years in the past beginning with a neighborhood hiring spree, finally launching a waitlist for customers in late 2019 earlier than abruptly pulling the plug in mid-2020. The corporate by no means actually gave a full rationalization for the choice, merely noting that “quite a bit has modified these previous few months” and that it needed to concentrate on its U.S. enterprise.

In fact, the corporate was going through mounting strain at residence, together with allegations that it was deceptive prospects and utilizing cynical gamification methods to entice inexperienced customers to make dangerous trades. The corporate has additionally been hit with a number of multimillion-dollar fines over system outages and different misdemeanours.

And tragically, 20-year-old scholar Alex Kearns died by suicide after seemingly misinterpreting a unfavourable stability of $730,000 in his Robinhood account, with the corporate finally settling a non-public lawsuit introduced by his household.

Regardless of all this, Robinhood turned a publicly-traded entity in mid-2021. The corporate now claims 23 million customers domestically, although a lot of this progress was spurred by early-lockdown boredom as individuals hunkered down at residence, rising from 11.7 million month-to-month customers in December 2020 to greater than 21 million six months later. Keep in mind meme shares? Yup, Robinhood was a serious protagonist in that entire affair.

So what does this all imply for Robinhood now, because it takes a second shot at worldwide enlargement?

“We’ve definitely realized from our earlier launch try, and as a enterprise we’ve grown and matured to a stage the place we’re 23 million prospects, $87 billion in property, and a listed enterprise,” Robin Sinclair, Robinhood’s U.Ok. president, defined to starcrypto. “We’ve additionally constructed expertise that permits us to scale internationally.”

Robinhood app Picture Credit: Robinhood

Nevertheless, a lot has modified elsewhere since Robinhood’s final launch try. Various native gamers have gained steam for starters, notably Richard Branson-backed Lightyear which began out by permitting U.Ok. shoppers to commerce U.S. shares earlier than increasing to help European customers and shares. After which there’s Freetrade, the place Sinclair beforehand served as European managing director earlier than becoming a member of Robinhood this summer season. Freetrade helps U.Ok.-based merchants investing in U.S. and European shares, and it’s gearing as much as broaden into Europe shortly.

It’s these youthful upstarts that Robinhood will most probably be up in opposition to at first, quite than dusty previous legacy monetary companies corporations equivalent to Hargreaves Lansdown.

“Robinhood’s enchantment within the U.S. was to a youthful tech-savvy viewers seeking to entry the shares market,” David Brear, CEO at fintech consultancy 11FS and co-host of the Fintech Insider Podcast, informed starcrypto. “It’s doubtless they’ll enchantment to an identical viewers within the U.Ok. who’ve beforehand discovered the value and entry barrier to the inventory market too excessive. I can see them going head-to-head with Freetrade when it comes to goal market to begin, after which shifting on to focus on a extra funding savvy viewers equivalent to Hargreaves Lansdown customers, with larger funding wallets.”

Robinhood, for its half, has been making noises about coming into the U.Ok. for a lot of this 12 months. At its Q3 earnings this month, the corporate confirmed it could launch brokerage operations within the U.Ok. imminently, with crypto buying and selling to comply with for European Union (EU) markets. The primary of those pledges has now come to fruition, with U.Ok. shoppers in a position to commerce hundreds of U.S. shares, together with these of all the most important firms equivalent to Apple, Amazon, Microsoft, and Meta.

Customers can place trades throughout normal market hours, which is 9.30am Jap Time (ET) till 4pm, which interprets into 2.30pm-9pm UK time. Exterior these hours, Robinhood’s 24 Hour Market allows customers to put so-called restrict orders on 150 completely different shares 24 hours a day 5 days every week, operating from 1am (UK time) on Monday by 1am on Saturday.

Moreover, the corporate additionally helps American Depository Receipts (ADRs), which permits prospects to put money into some international firms that don’t commerce on U.S. inventory exchanges.

Classes realized

Regardless of the minor neobroker growth since Robinhood’s aborted launch three years in the past, Sinclair believes his firm is in a powerful place to capitalize on what remains to be a comparatively nascent market, and may lean on the expertise it has amassed from the U.S. over the previous decade.

“I’d say the U.Ok. is a good alternative, the market really actually hasn’t been disrupted but,” Sinclair mentioned. “It nonetheless seems to be and feels the identical method it did, with conventional brokers dominating with excessive charges — and that hasn’t modified. So I’d say the chance nonetheless exists. We take pleasure in a 10-year-old platform within the U.S. that has developed and matured — we’ve added a whole lot of merchandise and options, we’ve realized from 23 million prospects.”

Whereas the corporate has confronted scrutiny over the way it targets inexperienced merchants within the U.S., Robinhood is taking these classes into its U.Ok. foray with in-app guides, ideas, tutorials, knowledge, and market information, designed to arm fledgling merchants with the instruments to speculate correctly — or, not less than, not blow their total financial savings — with out having to context-switch between a number of data sources.

“That is all about placing it in a single place for a buyer, to allow them to facilitate all of that analysis and all that data earlier than they make trades and to information their funding technique going ahead,” Sinclair mentioned.

Robinhood training: Picture Credit: Robinhood

What’s clear from all that is that Robinhood is making an attempt to begin on the right-footing after missteps in its home-market — as an example, the corporate is introducing 24/7 chat, electronic mail, and cellphone help within the U.Ok. from the get go. However regardless of these latest efforts to enhance its picture domestically, the corporate would possibly nonetheless be struggling to get better from latest controversies, in keeping with Brear.

“Robinhood noticed great progress within the U.S. in the course of the peak of Covid when everybody was spending much more time indoors and on-line,” Brear mentioned. “They benefited from a wave in hype across the product and the model which then suffered considerably after the suicide of a 20-year-old buyer, and it hasn’t fairly recovered since. A lot has been written about Robinhood’s duty to coach their prospects about their product and safely partaking their cash within the inventory market, and regardless that they’ve invested in additional buyer training within the product and thru content material, their fame in all probability hasn’t fairly recovered since.”

Two years after going public, although, the obvious method for Robinhood to develop is thru coming into new markets, and as one of many world’s main monetary facilities, the U.Ok. makes a substantial amount of sense for its first transfer.

“The U.Ok. is an excellent interesting marketplace for fintechs for a bunch of causes — a powerful and collaborative regulator, a big prosperous fintech-engaged inhabitants, a number of expertise, and an entire panorama of different fintechs and banks obtainable as potential companions or suppliers,” Brear mentioned.

Present me the cash

Robinhood guarantees commission-free trades and no international change (FOREX) charges, whereas there aren’t any account minimums both (i.e. customers don’t should deposit x quantity to make use of the service). This all sounds nice, but it surely begs one easy query: how will Robinhood make cash?

Within the U.S., the Securities and Alternate Fee (SEC) criticised Robinhood for deceptive prospects over the way it makes cash. Certainly, whereas Robinhood is commission-free, it basically accepts the client’s commerce and sells it on to bigger buying and selling corporations which executes the commerce on behalf of the client — this can be a course of referred to as “fee for order movement” (PFOF). Thus, critics argue, Robinhood prospects obtain inferior costs for his or her trades, making the “free-trading” mantra little greater than a advertising and marketing phantasm — the investor themselves basically grow to be the product.

All of this, although, is moot for Robinhood’s entry to the U.Ok. Certainly, PFOF has successfully been banned there since 2012, whereas the European Union (EU) can be introducing a ban on the observe which is ready to return in by 2026. Elsewhere, Canada has additionally banned PFOF, as has Singapore, whereas Australia is shifting in that route.

The SEC had beforehand indicated that it’d contemplate a PFOF ban, although it has retreated from that stance for now. However it’s clear that the worldwide regulatory panorama is more and more taking a dim view of PFOF, main Robinhood to pursue completely different income streams.

Final 12 months, Robinhood launched a brand new program that permits customers to “lend” out their shares to different customers, with Robinhood taking a lower of the spoils, whereas it additionally launched a brand new retirement product. Lengthy earlier than all that, the corporate rolled out a subscription-based Robinhood Gold product with premium options, whereas it had additionally been shifting additional into crypto territory, although it not too long ago restricted among the crypto it helps because of regulatory scrutiny within the U.S.

It’s value noting that these strikes are additionally designed to appease Wall Road. Since going public greater than two years in the past, the corporate’s market cap has fallen from a near-$60 billion peak in 2021 to slightly over $7 billion immediately. Buying and selling quantity can be down total on the Robinhood platform, whereas information emerged this month that Google’s guardian Alphabet had ditched its remaining stake within the firm, having initially invested when it was nonetheless a non-public startup.

All this factors to an organization that has not been faring notably nicely, making income diversification and its impending U.Ok. launch all of the extra important to its future. Whereas there isn’t a apparent moneymaking mannequin in place for Robinhood’s U.Ok. launch, Sinclair mentioned that it plans to “add merchandise over time,” which could embody introducing current merchandise equivalent to Robinhood Retirement and Robinhood Gold to the market.

“We’re gonna construct a diversified income stream, there’s merchandise on our roadmap that we’ll ship, and native merchandise is a crucial element for us,” Sinclair mentioned. “What we’ve delivered within the U.S. actually reveals how diversified we might be.”

What can be notable right here is that whereas Robinhood is just bringing its stock-trading product to the U.Ok., the corporate is ready to launch crypto buying and selling within the European Union (EU). This is because of new EU guidelines coming into power subsequent 12 months centered on so-called “stablecoins” which might be pegged to official currencies, bringing a clearer authorized framework for crypto firms to work inside.

No such laws but exists within the U.Ok., although there are indicators it’d fall into step with the EU in some unspecified time in the future.

“For the U.Ok., we’re centered on launching brokerage, that’s our precedence and we’re gonna get that proper after which look to broaden internationally with our brokerage enterprise over time,” Sinclair mentioned. “Our crypto enterprise might be within the EU, and in time we’ll contemplate it within the U.Ok. — however for now, our focus is on brokerage.”

On an identical notice, Robinhood’s U.Ok. launch is notable insofar because it the platform solely helps U.S.-listed shares — this does really make sense for probably the most half, as it is going to enchantment to a brand new era of retail merchants, ones well-versed within the fortunes of Apple, Amazon, Meta, Tesla, Spotify, et al.

Nevertheless, Sinclair says it is going to look to open issues as much as further shares sooner or later.

“It’s completely on our plan — U.Ok. equities is one thing we hear from prospects, that’s vital to them,” Sinclair mentioned. “We’re beginning with U.S. shares, because it leverages our platform and our expertise within the U.S. However completely — U.Ok. is on our roadmap.”