Outages Plague Robinhood on Back-to-Back Days
Since launching in 2013, Robinhood has definitely made its mark on the world of FinTech. Of course, by offering users the ability to trade stocks without paying commissions, it’s also helped democratize the world of investing, making it a go-to for many market newbies. At the same time, the company has endured some struggles and setbacks, including getting called out by the Securities Investor Protection Corporation (SIPC), leading them to backtrack on a promised and promoted checking/savings account offering. The latest issue facing the FinTech came this week as an outage disallowed users to trade on the app for an extended period of time.
According to TechCrunch, Robinhood’s trading platform was down from 6:30 a.m. PT on Monday until 11 p.m. PT that night. The timing couldn’t have been much worse for the app as the markets saw a huge bounce with the Dow Jones Industrial Average even enjoying its largest single-day point gain ever (topping previous record-holder: December 26th, 2018). Then, while the app was up for a time, more issues emerged on Tuesday — although service was reportedly restored at around 9 a.m. PT.
Zooming out, the hiccup could also present a problem for Robinhood as competition has stiffened significantly in recent months. In addition to fellow FinTechs like SoFi offering their own free-trading platforms, more traditional discount brokerage firms have since cut their trade fees to $0, with Charles Schwab setting off a tidal wave in that regard. Since then, Robinhood has been trying to keep current customers interested by expanding their offers. This includes rolling out a Cash Management account and teasing the ability to buy fractional shares in the near future. Speaking of their Cash Management account, it was also forced to cut the interest rate it pays customers from 1.80% to %1.30 following the Feds half-point cut on Tuesday.
In a blog post from Robinhood’s co-founders and co-CEOs Baiju Bhatt and Vladimir Tenev explained the outage, writing, “Multiple factors contributed to the unprecedented load that ultimately led to the outages. The factors included, among others, highly volatile and historic market conditions; record volume; and record account sign-ups.” They added, “We take our responsibility to you and your money seriously. We recognize that many of you have questions, and we’re working to respond to them as quickly as possible. “
TechCrunch notes that Robinhood is apparently compensating impacted users on a case-by-case basis. While that may placate some, the incident is undoubtedly a black eye for the company — one that it can’t really afford giving the rapidly-shifting landscape. With that said, it does seem unlikely that this one event will lead to Robinhood’s unraveling. Still it could give new investors a bit of pause, perhaps no longer making Robinhood the default go-to it once was.