Robinhood App Encroaches on Banking Turf with High-Yield Money Tool
Libra isn't the only payment system that stands to threaten the banks. Popular stock market and crypto trading app Robinhood is going after legacy banks with the relaunch of a cash management feature. Robinhood COO Gretchen Howard is cited in Fortune as saying:
"Were going to come out with a cash management account soon."
The feature was previously launched and then quickly discontinued in December 2018.
Robinhood plans relaunch of high yield cash account https://t.co/SxJagEnOzZ
— FORTUNE (@FortuneMagazine) July 17, 2019
To an extent, the existence of cryptocurrency has already disrupted traditional banking because it is decentralized. When decentralized financial systems integrate with a fintech platform like Robinhood, banks clearly become superfluous. This is something that many of the big banks are trying to respond to using policy lobbying to slow adoption of such technologies or by constructing their own centralized alternatives.
It will be recalled that back in December, Robinhood announced the launch of a fee-free checking-and-savings account offering a 3 percent yield to its largely youthful audience. This came after the introduction of crypto trading on its app, which allowed many to interact with bitcoin for the very first time.
On that occasion, the launch was botched because regulators quickly pointed out that it was effectively offering an unregulated bank account with no deposit insurance as required under U.S. federal law. This time, however, the company has come prepared with the legacy investment banking establishment firmly in its crosshairs as it seeks to disrupt their business model. The approach seems to be unstoppable.
Robinhood Disrupting Banking Without Offering an Account
Following December's humiliating retraction, Robinhood is eager to stress that the new product is not in fact a bank account but rather a cash management tool embedded within customers' existing Robinhood brokerage accounts. While important for regulatory reasons, this is little more than a semantic difference because the new service still has the ability to functionally replace a conventional bank account.
The company is very unsubtle about its plans to unseat the existing order and create a new investment paradigm focused on bringing in large numbers of youthful retail investors instead of a handful of well-heeled investors. From a bank's point of view, this can only mean more disruption to add to that already created by cryptocurrency.
Robinhood Didnt Consult Regulators on New Checking & Savings Account Products https://t.co/wQDyTcTNMO
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