“How does Robinhood work?” – It is quite a brain scratcher!

Well, we have come a long way from brokers on calls to brokers on chats. Gone are the days when people called brokers to buy stocks and maintained handwritten books of accounts. With digitization, the way that people trade has skyrocketed.

Investing is like gardening— the more you nurture it, the better you yield. Regardless of the product or service, a basic rule in business is to make the platform so comfortable for your customers that they buy from you. In fact, not only once, you want the customer to buy from you time and again.

Does starting a stock marketing application like Robinhood interest you? If yes, this blog is definitely for you! Do you know Robinhood is the #1 app that allows free trading?

However, if the app does not charge a single dime, it further raises the two most important questions. First, ‘How does Robinhood make money?’ and the second is ‘How does Robinhood work?’ Surpassing 20 million users within nine years of inception is no joke. They do have an impressive strategy.

Running a business has only one motive – to earn!!! And by earn, we not only mean revenue but profits!

Team at Robinhood trading app believes that ‘Participation is Power’. Also, they believe that investment is for everyone – newcomers and experts alike! They aim to make their platform investment-friendly, highly approachable, and easily understandable for all users.

In this blog, we will make you well-versed with the Robinhood business model and strategy and also how to build an app Like Robinhood.

Is Robinhood legal?

Robinhood is governed by FINRA, ensuring safer operation for users. So investors can invest very safely and securely. Anyone with a SSN and legal identity can sign up and invest.

But First, What is Sooo Good About Robinhood Stock Trading App?

Best Elements of Robinhood Stock Trading App

Before we learn how does Robinhood work, there is a list of things that makes the application stand out. Let us explain those ones by one:

1. Costs

If there is any trading and brokerage app that is the most inexpensive and transparent, it is Robinhood. It allows its users to trade for free. You would be surprised that the option trades are also FOC (free-of-charge). The platform doesn’t charge any commission for the transactions users make.

2. Accessibility

Finance is an important thing. Nobody likes to mess with it. Robinhood app has a simple and very comfortable UI. The user interface is structured so well that it ensures the user’s journey is smooth like butter. It is essential to make every button accessible in stock trading app development.

3. FREE Crypto Trading

“How does Crypto work on Robinhood?” – There are very few brokers who enable users to trade in stocks as well as for cryptocurrencies. Robinhood is one of them. Robinhood shines out in front of all its competitors because of the dual service it hosts on its platform.

4. IPO – Initial Public Offering

How does stocks work on Robinhood? Well, being a stock trading platform, Robinhood stock trading application also has the option of subscribing to the IPOs declared by various companies. It does everything to grip the users to its platform. Basically, it does not leave any chance of letting the users go.

5. Principles-first Thinking

Making bold changes and accepting challenges bigger than ever before is what they aim to do. They have a very organized system at their disposal and they ensure to follow it at any cost.

6. Radical Customer Focus

Online applications can have glitches. But, how soon the customer care team resolves your problem is of utmost importance. And with Robinhood, as a user, you can reach out to them via web and voice mediums.

7. Safety First

Being so widespread, how does Robinhood work? When it comes to money, it is integral to make the platform as safe as possible for obvious reasons. Not only the transactions but also the private details of the user are also safeguarded. They update their cutting-edge technology algorithm from time to time.

That was all about why Robinhood soared this high in the FinTech market. Now, let us guide you with the business model of an app like Robinhood.

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What is Robinhood Business Model Canvas – How does Robinhood Work?

Robinhood Business Model

A business is nothing without a proper strategy!In fact, a business model canvas is a visual representation of a business model, highlighting all its key strategic factors.

A business model is a recipe with minimal but essential ingredients. It involves:

  • Everything it takes to make something
  • Everything it takes to sell that thing
  • How and what the customer pays

The ‘Robinhood business model’ is the most-searched query on Google.

Certainly, Robinhood is doing very well in the market. Let us look into the components of the business plan of Robinhood.

1. Key Partners

Generally speaking, in any business model, key partners are the main suppliers and distribution partners. This party can include all business, governmental, or non-consumer entities. Anyone who helps the business grow.

The key partners of Robinhood are AllPoint, MoneyPass, and out-of-network ATMs. This also includes multiple key investors who are on board with Robinhood.

2. Key Activities

The key activities are an organization’s principal operations to make its business model work.

How does Robinhood work with so many activities to manage? Robinhood, being a stock market and crypto trading application, has a great support from the entire team for maintaining these areas very keenly:

  • App maintenance
  • Software development
  • IT platform operations
  • Security measures
  • Marketing
  • International expansion

Not only these, but there are many more activities that an organization has to take care of in their daily functioning.

3. Key Resources

To know how does Robinhood work, there are certain key resources that you should know of.

A quick analogy to understand this component…
The main spice of a dish is called the hero ingredient. Right? In a similar context, the essential inputs that your company utilizes to create UVP (Unique Value Proposition), provide service to the customer segment also and ultimately deliver it to their customers.

For a trading application like Robinhood, the below-mentioned elements are the most integral.

  • Trading platform
  • User database
  • Security developments
  • Real-time market data
  • Venture capital funding
  • Tech and financial team

4. Value Proposition

Customers choose a particular brand’s product or service because they feel the value imparted by that particular brand is the most satisfying. This is the point for a customer to choose a particular brand’s items over the other available alternatives.

You should study the USPs of Robinhood deeply to get a better idea of how to make an app like Robinhood. Here are a few!

  • Robinhood has made it super easy for everyone (above 18) to trade stocks, EFTs, etc
  • Fetches & displays real-time stock details
  • Trustable and robust solution for stock long-term holding
  • Allowing commission-free Robinhood investments
  • Allowing another line of investment on the same app platform, i.e., crypto
  • Since the Gen Z and the generations after them have become interested in investing and two-folding the money.

5. Customer Relationship

In a Robinhood business model canvas, the relationship between the organization and the customers is the medium through which both parties fulfill each other’s needs. The business owner sells the product/service and gets money in return. Whereas the customer buys the items that add value to their life in exchange for money.

  • Email and social media support
  • FREE stocks for new users as a welcome gift
  • Smart push notifications
  • Provide real-time stock data to all users
  • Automatic notifications for circuits and stock price limits created

6. Customer Segments

All customers are distinct individuals. Similarly, each customer can be segmented into different behaviors, spending capabilities, personal choices, etc.

Wall Street Journal revealed that the average age of Robinhood users when it was a new launch was around 1 to 29 years old.

However, according to a recent survey by New York Times, the user’s average age is 31 years.

Various customers choose to trade according to their capacities.

  • High-frequency regular traders
  • Long term investors
  • Individual retail brokerage marketing
  • Electronic trading firms

7. How Does Robinhood Make Money? – Revenue Streams

If you have understood the Robinhood business model by this time, then you must be questioning how does Robinhood work and how Robinhood makes money…This is a big question!!

  • The app policy instructs the users to keep a specified minimum balance in their account. If the customer fails to do so, the user has to pay interest on the low cash balance.
  • Margin Lending is a unique feature and channel to earn money as a platform. Robinhood allows the users to borrow money depending on the securities they own in their brokerage account.
  • Premium application subscription for more services is a basic earning feature.
  • Payment for order flow to those brokers who direct the users to trade with the market makers.
  • Cash Management is another way of Robinhood earning money. Robinhood offers a debit card along with the brokerage account. This app receives an interchange fee whenever the user swipes the card anywhere to sweep funds.

8. Cost Structure

Running a business does not come without costs. Businessmen spend great sums of money for the business to function smoothly.

The answer to ‘How does Robinhood app work’ lies in knowing that they also incur expenses in the following format:

  • Backend employee team
  • Automated procedures & maintenance
  • Regular R&D for improvements
  • Marketing techniques to increase the reach & growth
  • Safety & security policies

9. Distribution Channels

The chains of businesses and counterparties that exist before the customer buys the final product are called the distribution channels. It can be one of the direct selling, selling through intermediaries, dual distribution, and reverse logistics channels. Robinhood has direct user traffic who install the application on their devices for personal or professional use.

Statistics – Why Make an App Like Robinhood?

Gradually, we all started using WhatsApp for messaging because it is used worldwide and is also very accessible. If you observe, Robinhood trading app walks on the same lines. The mission ‘Democratizing Finance for All’ implies that Robinhood is an application available in all countries except a few. It aims to be the go-to application for users who want to make online investments.

Know why 900+ clients believe in the robust solutions that Excellent Webworld provides as the best Fintech App Development Company!!

Below graph tracks the number of users of the Robinhood application.

Number of Users of the Robinhood Application

Source – Statista

Your Competitor Apps Like Robinhood Trading App

Considering the vast array of services Robinhood offers, its competitors are not one but many.

Let’s get into the depth of crypto and stock trading apps like Robinhood:

  • Beginner-level alternative – Fidelity
  • Investment app – Acorns
  • Cryptocurrency investments – Gemini
  • Retirement savings – Charles Schwab
  • Alternative that’s similar overall – Webull

3 Master Blaster USP Guidelines On How to Make an App Like Robinhood (Features Missing in Robinhood)

Features to Make an App Like Robinhood

It will be your best decision to choose Excellent Webworld for building your stock and crypto applications like Robinhood. We have found certain features from market surveys that the users look for.

You can provide the following in your version of the stock trading platform. Here you go!
1. Retirement Accounts – “How does Robinhood taxes work?” – did this question come to your mind? Those with long foresightedness always plan and save for the future. In such a scenario, Robinhood is a step behind. If users choose to park their money here for a very long time, they don’t get any tax benefits. You can introduce this stream of accounts on your version of this app.
2. Mutual Funds or Bonds –If customers want to make a diversified portfolio of investments, they cannot use Robinhood to fulfill their purpose. You can attract more users to your app by offering these facilities.
3. Proper Customer Support – Robinhood’s disadvantage is the lack of good customer service. As compared to the other brokerages, they are not as responsive. As a digital entrepreneur, you must note that your users can only reach you via the customer support team. Hence, you must hire a team that works with complete dedication for you.

How Much to Make an App Like Robinhood?

If you foresee yourself becoming a stock trading and finance app owner, you must be intrigued to know how much does it cost to build app like Robinhood.

Two Approaches Towards Robinhood App Development

1. MVP or Basic App Development

The total would round up to $35000-$40000.

  • Dashboard- This is the main screen of a stock trading application that lets users know all the information. This includes a watchlist, stock reports, weekly/monthly analysis, etc.
  • Portfolio – The portfolio feature allows the users to record the stocks they trade in and their history of profits and loss statements for future use.
  • Stock Trading Functionality – Buying, selling, and all other trades should be a flawless and seamless procedure for every user. The app programming should be free from bugs that hinder the smooth process or make it complicated.
  • Real-Time Market Data– The API development and integration game should be so strong that all the ups and downs in the stock market or crypto rates affect real-time.
  • Watchlist – A personalized watchlist can help investors keep track of all the stocks they are interested in one place.
  • Synchronization – The user doesn’t need to access the account from only one device. They might use another device or want to make a trade in urgency and do not have access to the original device. In this case, app synchronization can be a great rescue. This will make it easy and flexible for the user to access the app anytime, anywhere, and from any device.
Basic Features Estimated Time Estimated Cost
Dashboard 40h $1000
Portfolio 20h $1000
Stock Trading Functionality 65h $15000
Real-Time Market Data 60h $5000
Watchlist 38h $2000
Synchronization 18h $11000

2. Advanced App Development

If you choose to add new features to your stock market application development, the total would round up to approximately $40000-$50000.

  • UI/UX– The color shade selection, minimalistic graphics, clarity in graphs, charts, etc. all falls under the UI/UX designing of a stock market application.
  • Payment Gateway Integration – Making the payment procedures as smooth as possible is essential.
  • One-Tap Payment – With fifteen stocks on hand, a user might not necessarily have time to enter all the details. A one-tap payment can save a user’s time and energy in such scenarios.
  • Advanced Analytics & Reports– The advanced level of the app must provide detailed reports and figures for a better understanding of the users.
Advanced Features Estimated Time Estimated Cost
UI/UX 185h $15000
Payment Gateway Integration 45h $3500
One-Tap Payment 20h $3500
Advanced Analytics & Reports 70h $15000

Conclusion – Closing Highlights on How Does Robinhood Work?

The benefits of accumulating wealth are not unknown today. An application is just a missing link to improvise your business and take it to another level! Don’t forget that your business will survive through deadly pandemics also.

With a query like “Should I build an app for my business?” in mind, you must approach the experts at Excellent Webworld.

Contact us for any queries!

FAQs – How Does Robinhood Work?

Yes, every investor, whether novice or experienced, long-term or short-term perspective, can earn a great deal with the Robinhood app.

Yes, you can create an app like Robinhood. Your first step would be to understand how does Robinhood work and then look for a reliable stock trade app development company that can provide you with a robust solution.

As such, Robinhood allows its users to make commission-free trade. Adding more to this, the application has two versions – i.e., free and premium.

Since Robinhood is a part of the Securities Investor Protection Corporation (SIPC), it is a safe application. The privacy policy, terms and conditions safeguard a user’s funds and private information.

Mahil Jasani

Article By

Mahil Jasani

Meet the web tech lover and COO of Excellent Webworld. Mahil is an expert in drupal web development. He's the complete package skilled in design, development, and deployment of exceptional websites. His blogs are helping lots of start-ups to understand how to improve website performance and how to enhance web designs.