How does Robinhood make money?

How does Robinhood make money?


So how does Robinhood make money? Robinhood is a technology-oriented brokerage that operates with appreciably less overhead. As stated on the company’s website, Robinhood takes away what makes other brokerages expensive — a lot of commercial organization locations and manual account administration.

Most people wonder how does Robinhood make money, they believe that there is no way they can make sufficient money because it’s free to sign up. It allows investors buy and sell individual stocks for $0 per trade, by doing this, the company hopes it will capitalize on the vast millennial investors which are very important.

Robinhood doesn’t extort money from its users via unnecessary fees; instead, it has created other result yielding ways to make money than extorting funds from its customers. Robinhood does not consider excessive fees to be paid by customers as a reasonable way to make money because Robinhood is a “stock brokerage built with the needs of a new generation in mind”.

Robinhood has succeeded in carving out a niche by aiding millennials learn to invest without distressful price tags or additional features of trade discount on online brokerages like Scottrade, E-trade financial corps and many other different brokerages out there.

Most critics of Robinhood do not believe that giving inexperienced investors the coins to handle is a good idea at all. They see it as a detrimental risk to Robinhood. This is a result of the fact that these new investors have been given liberty by Robinhood to buy and sell with a minimal effort and with maximum ease you can think about.

Blain Reinkensmeyer, the head of broker research at, made it clear to the public when he stated clearly that with the ultra-cheap trade which robin hood offers comes with insanely thin margins if any at all. This means compromises will have to be made, anywhere whether it’s on tools, research, customer service, and application management. If Robinhood is really out to stay and wants to compete with the likes of Charles Schwab corps (SCHW), OR E-trade, then it must find unique ways to turn in profits. After all, the bedrock or the reason for starting any business is that such a business will make a reasonable profit while helping and rendering meaningful service to the public. This article will give a little idea to customers, prospective customers and the general public on how Robinhood makes money:

  • According to some sources, like Barron’s, Robinhood intends to implement margin trading, eventually charging 3.5% interest for the service. E-trade and other accounts charge a lot more than what Robinhood is charging.


  • Robinhood generates interest from cash deposits that have not been used from user accounts according to a report given by the federal funds rate.



  • Venture capitalists such as index ventures, ribbit capital, Andreessen Horowitz, Google ventures, social leverage, and others have invested more than $16 million in the Robinhood application.


  • Towards the end of September 2016, Robinhood announced the launch of Robinhood gold, which is an advanced version of the platform which exists, the new Robinhood – Robinhood gold, costs a flat fee of $10 per month as at the time of its announcement. Robinhood gold currently provides a possibility to trade, by customer’s pre and after hours, access to immediate proceeds, credits, and immediate deposits. This is the only service Robinhood charges you for and it is completely optional.


  • Originally, Robinhood intended to make money by a popular method used in the 1990’s known as order flows, to generate revenue, but Robinhood slowed down on the plan because it implements order through a clearing partner and as a result, receives little or no payment for order flow.

Notwithstanding, the company intends to proceed with its initial plan if it gets order flows directly from customers and starts to generate a lot of income from them.


  • The same way banks collect interests on their cash deposit, that’s the same way Robinhood collects interest on the securities and cash in the Robinhood account. Don’t forget, your trading is still commission free. Totally free.

Reinkensmeyer has advised clients to be ready for a wild and bumpy ride as Robinhood is working on establishing itself as a legitimate player in the brokerage space. He used Apple’s iPhone as an example, how it was initially bulky and had little or no patronage until years later, after the invention of the iPhone 4, Apple proved the public wrong. Likewise, the public should not, for any reason underestimate the power of Robinhood.

Ever since Robinhood Gold was launched, it has experienced signups increase by 17 percent monthly. Established in 2013, Robinhood has gained over 2, 000, 00 users, who have performed over $50 billion transitions and saved about $500, 000, and 000 in commission fees. Robinhood has raised a total of one hundred and seventy-six million in funding, from investors like Tim Draper, Google Ventures, and Howard Lindon.

Robinhood is absolutely regulated and safe. All you have to do is make sure you are a legitimate investor and not a criminal, make sure that you have tried to sign up and have filled the application form, make sure you reside in the United States of America and you are not fraudulent in any way.

Conclusively, Using Robinhood Gold, one can get about twice the trading power and an opportunity to trade for long for just $6 per month. Robinhood only charges you for this product and is totally optional. Furthermore, Robinhood gets its revenue by amassing interest on the securities and cash in Robinhood accounts, just like how a bank accumulates benefits on cash deposits. Robinhood works with integrity, fairness, and justice towards all customers, making sure that they are safe and that all investments are properly taken care of.

Robinhood is not just for beginner investors but for all investors. It has created new features in its mobile application that caters for experienced investors and new investors. The features are created so that no one is left out of the ultimate plan of Robinhood which of course is to dominate the investment sector, with the satisfaction of its customers in mind.

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