Playworld Interactive Holdings Sees a New Trend in Stock Trading in the Near Future
Large online brokerages of the world…consider this a warning. A new iOS application known as Robinhood is changing the way stocks are traded by offering unlimited free trades and no minimum deposit requirements.
Yes, you read that correctly. Free trades. As more young people realize the importance of investing, they are often discouraged by trading fees ranging from $7 to $20 or more. Although an experienced investor moving thousands of dollars at a time can easily recoup the cost of a trade with even a minor upswing, it can be difficult for someone investing only a few hundred dollars at a time to justify this cost.
You may be wondering how the company plans the make money since there are no trading fees to collect. This represents a drastic (but welcome) departure from the fees associated with traditional brokers including Scottrade, TD Ameritrade, Charles Schwab and others.
Since Robinhood is an online-only trading platform, the company hopes to keep operating expenses to a minimum. This model has been tried before, but failed as a long-term business model (Zecco for example). Can Robinhood break the mold by creating a truly free trading platform? Based on consumer interest so far, it’s definitely possible.
Think about the implications of this product for a moment. With no fees, anyone can purchase stock without losing money right away in trade commissions. The company hopes this fee schedule (or lack thereof) will attract young new investors that may have been turned off from investing because of the antiquated, hierarchical fee structures associated with both online and brick-and-mortar brokerages.
On the surface, it may not seem like a very profitable business model, but Robinhood and it’s investors have a plan. By offering a free app with no trading fees, the company hopes to attract many users quickly. Following a model similar to Amazon, Robinhood hopes to make a small amount of money from a lot of people. Potential revenue sources include fees for margin trading, charging developers to build on the Robinhood API and eventually, the company can earn interest on the assets it controls.
Robinhood makes equity investing easy and accessible to everyone. You don’t need thousands of dollars at a time to make money in the stock market thanks to this groundbreaking new idea. Although the app isn’t publicly available in the App Store yet, the app has already raised $3 million in investor-backed funding and is positioned to change the way stocks are traded in 2014 and beyond.