Business Model

Introduction
Robin hood is a stockbroker company that began about ten years ago at Stanford.
Bijou and Vlad met in school, and after their graduation, they went to New York to start
financial companies that were selling trade software to the popular hedge funds. Their
business model was the type of build suspense. The experiences of Vlad and Bijou in the
financial world and the experience they gained over the time they were in New York
made them realize that the Wall Street firms paid nothing to trade the stocks, yet they
charged people commission to enable them trade. The two decide to build Robinhood, a
company that helped not just the wealth, but everyone could access the financial markets.
This company was created in California, and it uses technology to allow most of its
clients to participate in trading (Bansal et al., 2019).
Revenue at Robinhood
Robinhood earns revenue in several ways. This includes the Robinhood gold that
is composed of powerful investing tools that give the trader access to details that may not
be accessed by the other trader's means such as the NASDAQ Level II Market Date. In
this type of account, the trader can make substantial instant deposits, and it also allows
the trader to do margin investing. The fee that gives access to this account is just $5 and
is paid monthly to Robinhood. They make money when a trader buys or sells stocks,

ROBINHOOD BUSINESS MODEL 3
ETFs through breakage accounts (LeBaron, 2019). Mostly the orders are sent to market
makers for them to do the execution. The market makers offer better prices compared to
the exchanges. This company has several market makers for such performances.
They also generate cash on uninvested traders’ money that is not taken to the cash
management network by depositing them in banks that earn them interest. The other way
they make revenue is by loaning the traders considering a margin of counterparties. The
Sutton bank receives an interexchange fee between the clients and the broker; this fee
earned by Robinhood’s debit or credit card is used to cover fraud. Robinhood is also paid
by banks that sweep fees for them (LeBaron, 2019).
Technology at Robinhood
Technology has indeed enabled most companies to prosper. Robinhood is not an
exception in the financial world. With the introduction of software and digital services,
Robinhood has made stock trading applications that make the hustle easier. Traders are
updated on the stock market dynamics and trade from the comfort of the trader’s home.
The Robinhood application was launched in 2014 in the apple store. It lets the traders
create a portfolio, update market data, and is also a platform that enables notifications to
the trader on market proceedings. It will allow investments without waiting for funds to
settle, making it an effecting trading application. Most thanks and work derived from
artificial intelligence and machine learning (Guides, 2019). The mobile application has
made the company make significant progress since its users stand at six million, and the
executed transactions in the application are over $75 billion. A majority of Robinhood

ROBINHOOD BUSINESS MODEL 4
users use the application to trade. Being of a young age most traders are age 28 to 41. In
2019 Robinhood enabled its trading of cryptocurrency, and it started in California (Guide,
2019).
The Robinhood’s application is simple to use, user friendly. Its design is simplistic
and straightforward but runs on micro-interaction elements, which are only found in
similar applications. It is not expensive to design, but it requires a certain level of
innovation instead of having intricate designs. Their backend development requires a
high cost to develop but is entirely dependent on the technology in use. The font-end also
depends majorly on this technology. Robinhood has made it so far because of technology;
they are built on technological grounds of companies like Amazon. They use the EC2 and
the Route 53 concepts in completing the application. Bootstrap, DigiCert, Django,
Python, and other software keep the company on solid ground regarding its application
elements and software developments (Glossner, 2020). While they develop using this
software internally, the Robinhood uses google apps for doing their marketing. Google
puts it in a more accessible place because of the numerous Google users. This has
significantly increased the number of subscribers.
Difference between Robinhood and other Platforms
There are several platforms for trading stocks in the world. Moreover, more have a
place in the technological era. A good competitor of Robinhood is a company known as
E-Trade that has been in the market for a long time. Robinhood has had its leaders, and
more traders prefer it to the E-TRADE that was launched in 1983. The main reason why

ROBINHOOD BUSINESS MODEL 5
Robinhood beats E_TRADE is the fact that it offers free trade in stocks and a
commission-free investment to its client (LeBaron, 2019). This only lasted for its early
years in the business, 2015, when it allowed access to its customers. Now the story is
different since many other brokers are offering the same services for free.
Robinhood has an advantage; for instance, over E-TRADE because it allows
investors to trade as little as possible, a trader can even start with one share in this
platform. As much as there are interfaces in both platforms, the website and application,
which are easy and convenient to use, Robinhood offers a fast and convenient way of
opening accounts and allowing trade to begin in less than minutes on both the website
and the application. Robinhood pays on idle cash that is not actively involved in the
trading process. It also offers 24/7 technical support to its clients. Research has proved
that the market brokers risks a lot, making them earn much compared to the other traders.
For instance, in January 2020, the E-TRADE paid an interest 0f 0.2 cents per a hundred
shares, while Robinhood paid 0.26 to 1.13 cents per a hundred shares of the S&P 500
stocks. As much as E-TRADE beats Robinhood in most of its restriction, infrastructure,
and management, Robinhood's popularity still out ways such because of the way they
offer trades to their respective clients (Bansal et al., 2019).
Initiatives that have helped Robinhood Grow
When Robinhood got into the project in 2013, which was implemented in 2015,
the history was that it was difficult to invest in the stock market since getting into it was
expensive. Robinhood was free; this resulted in the company having many clients who

ROBINHOOD BUSINESS MODEL 6
invested in the trade though Robinhood as their broker for a lot less than the other
companies in existence. Most of Robinhood clients are millennials and are new to the
stock market (Angelova, 2019). The people that saw the stock market as not being theirs
are currently having a feel of inclusivity. The name Robinhood is also a strategic plan to
sell the company’s reputation. The outlaw, Robinhood, stole from the rich and gave to the
poor. This is one reason it had grown more than 1 million subscribers in 2016 alone and
had got to 6 million accounts by then (Glossner, 2019).
Creating suspense has given Robinhood a way of getting many clients. Since the
coronavirus downturn, many young people opted to get into retail trading in early 2020.
Many brokerage accounts saw the entry of many traders into the market, and the
Robinhood had 1.2 million accounts opened in the beginning months of the year. The
influx of young inexperienced traders greatly benefits ROBINHOOD and has seen its
revenue rise; the number of users has greatly increased from April to May. People,
especially the young, started taking the trading seriously in the March session. Robinhood
has been launched in the UK and is expanding to other countries (Guides, 2019)
Target Segment of Robinhood
According to Glossner (2020), Robinhood is the product that takes the breath of
many traders away. Being commission-free has a significant impact on the market. The
Robinhood brokerages’ initial target market is the people who never invested because of
the commission initially there in buying or selling shares in the stock market. The wall
street brokers initially charged $7 to 12 for every buying or selling of shares, making it

ROBINHOOD BUSINESS MODEL 7
look like a business for the wealthy. However, with the introduction of commission-free
trading, many have joined the industry and are now comfortably trading. The model
opted by the Robinhood business has enabled it through milestones, and they are
currently leading in the states with a vast number of clients.
Robinhood has a pricing strategy that is free and saves money on every
transaction. This has forced down many competitors in the industry since many traders
are in love with Robinhood’s trading way. They enable users to learn the best things to
buy and sell. Users can obtain complete detail from the trading platform, and there is no
need to go to other media to receive such information (Angelova, 2019). They finally
allow the users to get fast trading ways without many delays, like in other sites. Even
before they introduced their website, Robinhood had begun marketing, and it had
attracted more the 1 million subscribers before there official launch. The marketing
strategy used by Robinhood is that creates suspense before launching the product. They
give media outlets a chance to review their features; they write about the work to create
an environment where clients would want to acquire more about their products than the
people sign up to have early access to their products before launching. This way of
marketing is very efficient. Most people out there already have trust in Robinhood. This
gives it an upper hand in the market to its competitors. However, they need to up their
game against these traditional companies in the stock market because others have also
relaxed their commissions to suite the competitive environment. E-Trade, for instance,
has shifted its attention from the casual traders to the active traders.

ROBINHOOD BUSINESS MODEL 8
Robinhood’s Competition Advantage
The fact that Robinhood had zero commission for trades gave it an upper hand in
2015 when it was new to the market. Now the strategy must shift because many
companies have zero commission fees and offering fair competition to Robinwood. The
other advantage it has is the fact they there are many traders already at the company's
grasp, meaning it does not have to spend much energy going to convince other clients to
come and join their course. People already trust Robinhood, and as a matter of fact, more
and more people are joining to trade with them day by day, mostly the young aged
between 28 years to 41 years. The fact that their clients are young also gives them a
promising future, most of them being in the age of generating income. The application
and the Robinhood platforms are easy to use, and they offer much help to guide the new
traders on how to trade also sets them at an advantage (Basal et al., 2019). Lastly, their
marketing strategy, which creates suspense, sells them, and the way they are open with
the data and makes their clients feel involved. Their name, Robinhood, also gives them
some advantage.
Challenges and threats facing Robinhood
Competition from other brokers who have risen in the recent past and others who
have been in the market long before Robinhood came to the market. They have also
lowered the transaction fees some to zero neutralizing Robinhood’s move. The other
challenge they are facing is the difficulty in globalization on the company; they tried
expanding their trade to china and failed; it is only recently that they were allowed to

ROBINHOOD BUSINESS MODEL 9
trade in the UK. The March 2020 crush of their systems due to more people logging in
with the less capacity in their systems tinted their image, making some of their traders
opt-out and some others suing the company (Glossner, 2020). Although they managed to
restore trust and assure their traders of their share’s security, their image was still tinted.