Following criticism, Robinhood backtracks on checking and savings feature

Stock trading application Robinhood announced early this week that it will provide users with new functionality in early 2019. Checks and savings accounts were not charged. However, after this feature was strongly criticized, the company said, "We plan to work closely with regulators while preparing to launch cash management programs."

Started in 2014, allowing users to trade stocks. It is free to companies listed on the US Stock Exchange. A year later, the user base grew to hundreds of thousands of customers who "transferred $ 1 billion" from the platform. Earlier this year, it launched a new feature that allows users to trade cryptocurrencies and began talking to regulators to provide other banking products such as savings accounts.

Regulation and Bloomberg pointed out that most financial start-ups at the time solved this by partnering with existing banks and license holders. Earlier this week, Robinhood launched a new feature, savings and verification, which comes without a Mastercard debit card and ATM, membership, overdraft, transaction or other fees. It's a huge 3% interest rate – well above the national average of .08%, even though it may fluctuate significantly depending on the health of the macroeconomy. Robinhood also said the feature would be insured by the Insurance Investor Protection Corporation (SIPC), not the Federal Deposit Insurance Corporation (FDIC).

The problem is that no one told SIPC that this is happening, and the account looks like a bank account, but it is not. Companies such as SIPC and FDIC provide significant protection to those who put money into securities or banks when they fail. Stephen Harbeck, CEO of SIPC, said in TechCrunch "Robinhood will buy securities and share some of its proceeds with customers." What they cover. Harbeck Bloomberg said he "expressed a serious concern about the issue," as the company had the capability in advance.

Analysts were less charitable. CNBC UBS analyst Brennan Hawken said, "It's a potentially dangerous strategy for doing potentially regulatory investigations because it's really close to banking." Hawken also notes that Robinhood is investing in treasury bonds It is now a 2.7% interest rate), not a bank account but "similar to a money market fund") and may also make some contracts with an ATM retailer to bring in income to keep the consumer at a 3% interest rate.

Robinhood removed blog postings following rebounding and "excitedly and modestly" reacted to the product from co-founders of Baiju Bhatt and Vlad Tenev, saying, "We are working closely with the regulatory authorities as we prepare to launch a cash management program. And plans to "reorganize" the program sales method.

It is not clear what this new "cash management program" looks like. Robinhood spokesperson Lavinia Chirico did not respond to recurring requests to explain and explain what the future of the feature would look like or what the company is talking to regulators. The company is currently on the "cash management" waiting list, but its appearance remains rare. The small letters in the subscription email will simply have an add-on to your brokerage account and you can run a cash management program "not a separate account or bank account". "

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