Robinhood Applies for National Bank Charter
Late last year, FinTech investment app Robinhood famously ran into a bit of trouble when it announced plans for a “Checking & Savings” account. Long story short, the company was forced to walk back that announcement after it came to light that their plan had not been vetted by the Securities Investor Protection Corporation and, while a “coming soon” banner for a Cash Mangement offering still shows on their site, there haven’t been any further announcements since. Now it looks like Robinhood may be taking their plans in a slightly different direction, applying for a national bank charter of their own.
According to Bankrate, Robinhood filed an Interagency Charter and Federal Deposit Insurance Application with the Office of the Comptroller of the Currency. In that application they not only make reference creating high-yield savings accounts but also secured credit cards. The company notes that they wish to offer “a fairer share of the benefits derived from use of the customers’ deposits in the form of a higher interest rate” and that these plans are meant to help with “democratizing financial services.”
In a statement to Bankrate, Robinhood said of the move to seek a national bank charter, “Robinhood’s goal is to be able to offer its customers a full suite of financial products to service their needs.” Interestingly they went on to add, “To that end, Robinhood Financial, LLC, one of our broker-dealers, plans to offer customers a cash management feature within their brokerage accounts. More information will be shared later.” That would seem to suggest that the Cash Management feature the company initially talked up last year might not be contingent on receiving their bank charter.
Not surprisingly, Robinhood’s application notes that they don’t intend on having brick and mortar locations or accepting cash deposits at ATMs. Instead, like the vast majority of online-only banks, Robinhood customers will manage their accounts via the company’s website and/or app. Presumably one app would be home to both the firm’s brokerage and banking offerings, although this was not confirmed.
While Robinhood’s move to expand into more banking features may be exciting for consumers, there’s no question that the company will need to overcome some hurdles. For one the “Checking & Savings” debacle left the firm with egg on its face and likely left a bad taste in the mouth of regulators. As Innovation and Governance direct Brian Knight told Bankrate, “They’re starting with something of a black mark on their record.” Hopefully Robinhood can redeem themselves and stay on the right side of regulators in order to make their latest shot at disruption pay off for themselves and consumers.