Robinhood is growing beyond trading

Robinhood Markets’ suite of new products, including its credit card and futures trading platform, will be critical to driving growth as market volatility and regulatory risks cloud the near-term outlook for its traditional business, analysts said.

The expanded offerings show that the 11-year-old trading app, best known for its appeal to retail traders, is starting to mature into a full-fledged financial services provider.

“Traders are looking for more sophisticated and diverse offerings after the meme-stock era, and Robinhood needs to expand its services to keep up,” said Dan Raju, CEO of brokerage platform Tradier.

Here are some charts that explain the situation for the company in Menlo Park, California:

CREDIT CARD

More than a million customers have signed up to the waiting list for a credit card that Robinhood launched in March for its Gold subscribers.

This card doesn’t charge an annual fee or a foreign transaction fee and offers 3% cash back, in the form of reward points, on spending. Analysts believe it’s the key to boosting subscriptions to the next level.

“Robinhood and other neobanks in the market are proving they can be formidable competitors in the banking industry,” said Lauren Ashcraft, financial services analyst at Emarketer.

PENSION ACCOUNT

Robinhood offers a retirement account to its customers. Eligible contributions to the account may be matched by a percentage, subject to a five-year retention period.

Pension assets on deposit totaled $4.2 billion at the end of March, compared with $0.3 billion at the end of last year.

GOLD SUBSCRIPTIONS

In the first quarter, the number of gold subscribers increased by 42% to a record 1.7 million, according to Robinhood.

The Gold membership gives customers access to more premium features, such as increased retirement account contributions, higher interest on their uninvested cash and cheaper margin loans.

“While the company has been successful in attracting new customers to the platform, the question of long-term profitability for investors remains,” Barclays analysts said.

FUTURES CONTRACTS, INDEX OPTIONS TRADING

Robinhood said it is focused on being the platform of choice for users who trade more actively and use more sophisticated products.

It is expected to launch index futures and options trading later this year.

“We intend to make (the economy) very, very competitive, but also profitable for the company on a segment basis,” CEO Vlad Tenev said.

TRANSACTION INSERTION

Optimism over the approval of the first bitcoin exchange-traded funds in January helped the company post a better-than-expected first-quarter profit on Wednesday.

“Despite a strong quarter, we emphasize that this is a great environment for Robinhood and its clients, one that is likely more unusual than usual,” JPMorgan analysts said.

Robinhood said momentum continued into the second quarter, although some urged caution.

“Given the natural volatility of its trading volume and cryptocurrencies, as well as the regulatory uncertainty following the Wells announcement, it will be difficult to sustain this level of growth,” said Mr. Ashcraft.

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