Robinhood launches its own trade clearing system as customer growth increases

The start-up based in Menlo Park also announced Wednesday that it now has 6 million customers, against 5 million in August and 4 million in May. According to Pitchbook data, it was valued at $ 5.6 billion and has raised $ 539 million to date. Early investors include NEA, Thrive Capital, Capital G, Sequoia, Index, DST Global and Kleiner Perkins.

Until now, Robinhood was clearing customer assets through a third party called Apex Clearing. When the team looked at the landscape to find out what was available, Tenev said the only options were the existing technologies running on mainframes and not having been updated for decades.

Christine Hall, product manager of Robinhood Clearing, said there was "no guide, no discussion in the sector" to explain how to launch an internal compensation system on modern technology.

"It's really a first of its kind, we've put together an amazing team of engineers to try to understand how to incorporate the technology of the 1960s," Hall said.

Tenev compared this decision to Apple who decides to create its own chips or to Amazon who invests in distribution centers. Even though these applications are not directly aimed at consumers, they subtly enhance the customer experience. For now, Robinhood Clearing will only be used on its own platform, but they have not ruled out the possibility of marketing it.

At the present time, online brokerage does not charge a trading fee, but fees are associated with other transactions such as ACH transfers or overdrafts. Bank reversal fees go from $ 30 to $ 9, and the fees for "voluntary actions" are reduced from $ 50 to $ 0.

Robinhood's Hall said it would have a better understanding of customer accounts and that, as they can now track every step of a transaction, they can get to the bottom of customers' problems , she said.

The startup is best known for its commission-free investments in equities, ETFs, options and cryptocurrencies. The majority of its users, aged 18 to 35, are millennia old. This zero-zero model is pushing some incumbents to reduce fees, which have plummeted between mutual funds, ETFs and transactions. JP Morgan Chase, for example, launched its own free app for customers in August.

More importantly perhaps, the announcement Wednesday will prepare Robinhood to move faster and expand to more areas of financial services, the CEO said.

"In five to ten years, you should be able to open up Robinhood and get everything you could get by walking into your local Bank of America, with a better customer experience and a better price," said Tenev.