Checking accounts are loss leaders virtually everywhere, the exception being smaller community banks. Their primary revenue stream was, once upon a time, net interest income, but these days due to the extremely low interest environment and alternate sources of funding the revenue stream is more weighted towards fees (primarily NSFs, although that was hit a few years ago) and debit card interchange.
Robinhood also likely expects to not become the park-your-money account of choice for older dentists but rather to become the spend-your-money account for their millennial userbase. With high velocity of money and low balances the interest expense is minimal and, to the extent they use debit cards, the interchange revenue can be material. (In a stylized example where someone makes $2k a month and spends $200 on debit card purchases and $1.8k on rent/etc the interest cost for the year is ~$30 and the debit card interchange for the year is ~$60, even ignoring potential interest revenue.)
This is roughly in the same line as their core strategy, which is spending what would otherwise be a marketing budget on keeping commissions at zero, making money on the other ways brokerages make money. If you do not understand how a brokerage makes money, I encourage you to peruse the annual reports of e.g. eTrade or TD Ameritrade, which will happily explain their revenue sources and why commissions are a surprisingly small portion.
Metacomment: geeks who believe they have outmathed a financial firm should ask themselves "Are financial firms likely to be bad at math?" and "Are financial firms incapable of hiring their own geeks?"
reminds me of the first time i interviewed at google, and one of the interviewers asked "if you could set up your own project and get a team to work on it, what would you do?". i answered that i would get a bunch of maths phds together and have them work out graph-theoretic ways of detecting link farms (this was 2004, and i had actually been wondering for a while why google hadn't done exactly that).
the interviewer (who was a pretty senior person) asked "why do you think the spammers don't have their own phd mathematicians to defeat such measures?". i was only a few years out of grad school at the time, and it was honestly the first time i thought about the fact that people who were both smart and educated might nonetheless go into a shady and declasse activity like running spam sites. i consider it a valuable lesson to this day.
The financial firm, bookmaker and casino just needs to outmath the 99.9% of customers who are not trying to beat them to win, and evict the 0.01% of customers whose outmathing is so good it is causing them problems.
99.9% of customers who are not trying to beat them to win
0.01% of customers whose outmathing is so good it is causing them problems.
The rest are customers who are outmathing them, but not enough to cause them problems. And by problems I mean problems worth spending their time on.
The crooks I've met have been the smartest and most insightful people I've met in tech. I know one guy who, after years with a CC scam operations when to work for an online merchant. His knowledge of payment systems and payment processor policies was encyclopedic. The big issue was whether he was trustworthy. Lucky he had never been convicted of anything.
Thus, your response should have been: link farms with their own phds is only more reason to instantiate your plan
Go on a blackhat SEO forum. Look at the number of sellers, the number of listings, the number of positive feedback and the cost of some packages (you can easily go on and spend 50$ or a 1000$+ for a single package). There's a LOT of money in blackhat SEO. That's just the people offering to do it for you.
Then look at the dozens of software packages for sell that are constantly being updated and have both one-time fees and ongoing subscription pricing.
Then go look at the people selling just various social media accounts which mass-creation of gets harder and harder.
Then there's people that sell VPS access. They'll buy the software tools and host them all on a VPS and rent to you weekly or monthly so you can shell out tens of dollars or hundreds of dollars a month instead of needing to cough up thousands just to get all of the software for the month.
And that's just what's readily available with paypal or a credit card on the clearnet.
I never would have thought about the shady side had you not told this story. Makes me start to wonder what else I’m missing...
I agree that the high rate is reasonable in that scenario, but the high rate is also actively fighting to ensure that scenario doesn’t happen.
I don’t see people here thinking that Robinhood is bad at math. They’re all asking, “what’s the catch?” Because it sure seems like there must be one.
Which should tell you a lot. I've been through the "Millennial Bank" wringer.
Honestly, checking accounts are all the same. Especially because I use a credit card paid in full every month. It's a holding pool till next month's CC bill is due. Until the US treats debit cards with the same protections as credit, I won't let my debit card near a gas pump or wander off with a waiter or be used online.
I don't know that there's an opening really. That so-called opening keeps popping up since like 2005 and gets "filled" by a SV-backed MVNO-For-Banking and it's just........a checking account provided by some.other actual bank repackaged with a (nice) angular front end and on the AllPoint ATM network with crappy chat customer support.
From the Robinhood website fine print “Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account.”
So, yes, opening a Robinhood Checking & Savings account does mean that they will open a trading account, because they aren't actually different accounts. (And it's a waitlisted feature where you get moved up the waitlisted by referring others to RobinHood, so it's a clear way of getting the overall service in front of more users.)
Yeah but people do grow up. And I don't know about you, but I've got some super long term relationships with some banks. They are in it for the long game.
(I mean it would be great if there were a bank that did all its customer service over text chat, but that's too much to ask for, right?)
And I’d really wish they’d just stop
The branches have only been to my benefit, never really required, just faster.
I think Simple was supposed to be that. I wonder how they'll respond to this, given that they only recently moved to 2% ($2k minimum).
Or maybe they're going to be able to sell people's transaction histories...
You are assuming that customers make this decision rationally; marketing very often leverages the fact that humans very often don't do that.
Or you bank at Wells Fargo or some other institution whose corrupt practices spill out into public.
I remember the days when Citibank would give out 4% interest about a decade ago. now of course, it's about 0%. It's just classic bait and switch.
That's not a bait in switch, interest rates plummeted globally to the point a lot of people were happy to even get 0%!
Iceland's government/deposit insurance did not pull through.
Cyprus wasn't much different either.
This are cash balances, not money market funds or any other funds.
He later stated that the SEC would need to take the lead on clarifying the matter though.
I have a one-year emergency fund with Robinhood that is invested in index funds (secondary emergency fund as the primary emergency fund is in cash). I think I'll keep my primary emergency fund in the PNC high yield savings account for now until all that gets worked out.
Robinhood's checking page says "Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account."
Account has 3 parts:
1. Marketable securities -- value is NOT insured.
2. Cash on hand -- value IS ensured.
3. Money market fund -- value is NOT insured.
(3) may or may not be offered and if (3) is offered it has to be elected by the account holder. Money cannot flow from (1) to (3) or from (3) to (1) bypassing (2) due to securities regulations -- one cannot pay for one security with another security, a settled cash must be used.
If the APY is on (2) they will get killed by the fatwallet/slickdeals crowd. If the APY is on (3) it is more complicated but debit/check transactions against (3) are very expensive to clear so I don't quite see what the play is.
Are you unaware that interest rates today are drastically different than a decade ago?
A decade ago, the rate was 1.00%. (And three days later, it was 0.00-0.25%.)
The product is already being renamed as a "money management fund"
So Robinhood wants users to have their cash on hand ready to jump into the market. Will be too tempting to many.
Think of it like being a health insurance salesman who puts your office at the top of a long flights of stairs. You can have a lower risk pool because the only clients who come to see you are the ones who can climb a bunch of stairs to get there.
In other words, they advertise to a user-base that doesn't have much in the way of savings so they're avoiding people who would keep high balances anyway.
Besides, most people who do have large balances tend to park them in money market funds anyway. They can usually hit between 2% to 3% annually and offer more flexibility in terms of being able to access the money without transferring balances around. Alternatively they'll be putting it in tax-deferred accounts.
If you have enough money coming in that you can accrue a lot of savings, a savings account isn't the most productive place to put it. It should be regarded as more of a rainy day fund or a place to park money that you're saving up for something specific, like a down payment.
1. I don't care about physical branches, I've been using online banking from the beginning.
2. I am at a stage in my life where I am slowly paying back all my debts and making just enough to set some cash aside every paycheck.
I don't have enough money to go looking at financial instruments such as money market funds or CD's, because they tend to lock my money up for a certain period of time.
I still need to be liquid. Some place where I can make 3% and have it just sit is fine for me, and allows me to access it in case of an emergency without paying fines or penalties for doing so, and with less hassle than some other financial instruments where it is locked up.
Once I have a buffer built up, and I feel comfortable with that buffer, maybe then I'll start looking at other places to potentially let my money make more money faster with a little higher risk and with less liquidity.
3% guaranteed earnings is a very good deal without any downside, while the risks involved with trading that money are substantial.
Also, presumably lots of people would rather put their beautiful minds towards things other than being anxious about how their savings are going. There is a lot to be said for just being able to park your money somewhere and not have to worry about it while you go live your life.
Usually you want to build a tractor (recurring deposits to a reference rate) at the 7 or 10 year treasury, to ensure that you have a stable supply of available deposits, and a short term rate too to handle "hot money".
You make money on the spread.
I really don't see how they are funding their interest rate.
What I don't understand is those people who willingly park their money in CDs at under 1% and the banks proudly advertising these rates.
This era of seemingly permanent low(or even negative) rates just somehow seem unnatural.
What happened to banker's 6-3-3 rule? "Lend at 6%, borrow at 3% and go golfing at 3:00PM"
The Bretton Woods agreement ended.
It's not too crazy, rates have gone up a ton without most bank accounts adjusting from being near 0%. The 10-year is currently just under 3% with the whole curve being really flat and lots of online banks offer over 2%. I currently get 2.05% with my Marcus account and Goldman Sachs isn't exactly known for giving things away (and with 3 month t-bills paying 2.41% they certainly aren't giving anything away!).
With the current 2 year treasury being 2.76%, they must making money on fees. I am seriously considering moving my savings from a Capital One money market account that earns 2% to this that earns 3%. That extra percent is decently significant.
They have no customer service and a decently easy collection of horror stories related to their lack of customer service.
Moviepass was also bought by a financial firm... Come to think of it, they have many similarities. Both companies are basically handing out free money and it's unclear how they would make any profit. People speculate that both companies would make money by "selling data." Unless if Robinhood is doing something very illegal, there is no way that they could make enough money that way.
That said, I do think that Robinhood knows what they're doing. They're getting a lot of publicity right now. In the worst case scenario, Robinhood can cut costs by slashing interest rates and putting a cap on the number of free trades you can do. Their worth would plummet, but later investors would be the ones who pay that price. Overall, Robinhood would still be better off.
† You could argue either way about whether IB gets paid to "internalize" orders or whether the order flow rebates they get are something else.
If they had been able to work out a profit share off concessions and cheaper tickets with AMC/Cinemark/Regal/etc they might be in a different setting right now.
This means if there's a downturn in the market, they won't go bankrupt due to all the outstanding margin accounts (or have to do margin calls).
Big Finance knew it was hustling rubes, and then was able to ride the Gub'mnt Gravy Train when it became unsustainable.
In brief, models were constructed of the complex behaviors of packages of loans - CDOs. These models, trained under benign market conditions, did not account adequately for correlations that might make all their component loans default at once.
You can elaborate the story with a lot of context and granular detail, but the core of the crisis did have a strong element of "bad mathematics" -- bad mathematical modeling.
For more, see: https://www.maths.ox.ac.uk/system/files/attachments/1000332....
and references therein.
The paper concludes that while there were deficiencies with the modelling method (as there are with any model), input manipulation was at greater fault than inherent failures of the model itself.
"These results support the arguments of Donnelly & Embrechts and Mackenzie & Spears, that Li and the Gaussian copula were not to blame for the Crisis...Instead it appears that the gaming of the model beyond its original assumptions, the outsourcing of CDO risk management to credit rating agencies, and the failure to perform holistic risk assessment seem far more to blame."
"The simulation results in this paper show that it is more important to focus on parameter estimation than copula choice. This leads to the observation that when it comes to mathematical financial modelling: in order to avoid a disaster, the cooking is more important than the recipe."
My point is that mathematical models were indeed being used and followed in this case, and that the issue really was with overextension of the model, and not just generic volatility of any market, as claimed by the GP comment.
>poor mathematical modeling of the statistical properties of collateralized debt obligations (CDOs) was the underlying cause of the bottom falling out of that market.
The model is hardly to blame when falsified inputs yield poor results.
I'm not "blaming the model" - probably everyone recognizes that all models have limits.
I call your attention again to the point of my original comment - the GGP comment was claiming that the best mathematicians in the world could not have foreseen the kind of conditions that caused the 2008 market failure. I'm arguing that it was possible, and that it was clear (mostly in retrospect) that the model assumptions were being violated most promiscuously.
In fact, the real reason I chimed in is that I think this crisis was a really awesome example of the power that quite abstract mathematical constructs have over our lives. I felt that point was missed in the generic comment about "who could have known" that kicked this thread off, and I sort of wanted to rescue that underlying mathematical issue.
Metacomment: geeks who believe they have outmathed a financial firm should ask themselves "Are financial firms likely to be bad at math?" and "Are financial firms incapable of hiring their own geeks?"
The incorrect ratings were intentional and designed to look like they were correct so that no one would find out. It's easier to make sure no one finds out the number is wrong if you know what the correct number is and how to tweak factors here and there to influence it.
That's why it keeps happening. They get rich and get away with it every time.
Were you trying to sneak in a comment about an impending explosion? :)
No. But you don't have to be bad at maths to play exploitably.
Many years ago now I was a hand-to-mouth graduate student. New credit card companies wanted to attract customers so they offered an easy approval card with 0% finance for 18 months. Need to use some of your new credit on existing debts? Rather than figure out all the specifics they just included a cheque book with the product, just write a cheque to pay any debts and it goes on your 0% balance.
Everybody I knew took out a card, write the full credit amount on a cheque, paid it into a fixed term savings account.
Account term ends, you pay off the 0% card, keep the interest, cut the card in half and you're done. Free money.
The people who ran those new card companies knew this might happen, they just didn't guess it would happen often enough to ruin them. Not our problem. A few years later the deals on offer explicitly did not have a way to cash out. Lesson learned.
"Making money others ways" aka stripping their clients of financial privacy by selling their clients' investment-decision data: "Robinhood Is Making Millions Selling Out Their Millennial Customers To High-Frequency Traders" If your investment brokerage firm's strategy is to use you as a sucker, no marginal gain in interest rate is worth it.
Matt Levine does great write ups on this stuff, would highly recommend: https://www.bloomberg.com/opinion/articles/2018-10-16/carl-i...
The reality is that market makers price non-retail flow more conservatively (ie: costing traders more) because they have to anticipate informed large block trades wiping them out. Since they don't have to do that for retail flow, their cost basis for those trades is lower, and they can (and do) split the proceeds of that reduced cost with brokerages.
It's overwhelmingly likely that any other brokerage you use does the same thing, and simply doesn't tell you or pass any of those savings on to you.
But who's that "someone else"? It's not the robinhood customer, because they're getting at least the best price on NMS. So what's the issue? Would you rather pay $10/trade so your trade gets posted directly to the exchange and the profit goes to some random investment bank or daytrader rather than the HFT firm?
Currencies feed into the stock market, but it's not a closed system. If you think a company is undervalued in the stock market, and you buy shares, that raises the price of shares for that company. With a higher share price, that company can borrow money (by issuing shares) at better terms, and spend that money on growing more than they could have if they had not borrowed that money.
If the stock price is too low, the company may buy back shares of its own stock (thus enabling future borrowing). Alternatively, investors may buy up a majority of the stock of that company, thus acquiring control of that company, and either try to force the company to do a thing they expect to be profitable, or liquidate the assets of the company (which will then be distributed to shareholders in proportion to how many shares they hold).
So basically the stock market moves money to the companies based on how effectively they could spend borrowed money / how valuable they would be if liquidated.
This is why fiat currencies are so useful: you can change the length of the "ruler" to accommodate changes in the thing you're measuring, so the value of the increment remains stable.
Investing in the stock market is literally investing in the collective appreciation of the value of the companies that make up it.
Normally the investor would get the stock since they placed their order first. But since the HFT firm is paying for the order they get it instead. If things go well the HFT firm can sell to the investor at x+b, if things go poorly they cut their losses and sell at x.
The investor that didn't get the order and has to buy it from the HFT firm at x+b is the loser.
The money that funds this dance comes from the millennial who sold a stock worth x+c at x, but that would have happened regardless.
>They want to buy stock for $99.99 and sell it at $100.01 and clip two cents on each trade. If their orders are random—if sometimes people buy and sometimes they sell, with no pattern—then that works out well for the market makers. But their big risk is what they call “adverse selection”: Sometimes, when a customer buys 100 shares at $100.01, it then buys another 100 shares at $100.02, and another 100 shares at $100.03, and keeps going until it has bought 10,000 shares and pushed the price up dramatically. The market maker who sold it the first 100 shares—and who is probably now short and needs to go out and buy those shares at a higher price—has been run over.
>[...] [I]f a market maker can guarantee that it will only interact with retail customers—if it can filter out big orders from institutional investors—then its risk of adverse selection goes way down. The way the market maker does this is by paying retail brokers to send it their order flow, and promising those brokers that it will execute their orders better* than the public markets would. [...] It can offer a tighter spread than the public markets—and have money left over to pay the retail brokers—because it doesn’t have to worry about adverse selection. If the retail broker is, say, one designed to let young people day-trade for free on their phones, then those orders are probably particularly valuable, because they are probably particularly random.*
There are valid criticisms of payment for order flow but privacy isn't one of them.
no. most orders are not executed on the public exchanges, but by internal matching via your broker and a market maker. (also most exchanges only support trades in multiples of 100 shares.)
I believe all customer trades/executions on actual securities should eventually be publicly visible, though there may be a small delay for them to "print to the tape".
1. I don't know why the title mentions "millenial" customers in particular, because every brokerage does this across all demographics,
2. This activity is not "selling out" customers. If you believe that customers are "suckers" because their order flow is sold to high frequency traders, you have a very fundamental misconception about high frequency trading and its role in market making,
3. There is no codified definition of, or law protecting, "financial privacy" in the sense of order flow. This data isn't connected to you as an individual, just as you can't see which individuals or companies are placing bids and asks in the order book just because you can see the amounts and prices. All trades in the market are publicly reported regardless of whether or not your order flow is sold.
It never ceases to amaze me how the term "high frequency trading" can compel people to pontificate about things they clearly don't understand. You'd think we'd have collectively moved on from the Flash Boys misconceptions by now. Yet here we are, with an article talking about high frequency traders as some kind of financial boogeyman in 2018.
Why/how is Robinhood now showing how far along I am compared to my friends on the waitlist? I dont believe I ever enabled any social sharing, and Robinhood's access to my contacts is shut off.
I do not feel comfortable sharing (and especially not broadcasting!) my financial decisions with people I am connected to on social media. This is pretty upsetting to me.
2 - just because you didn't share doesn't mean your friends didn't
Source: I still have some money in a ~0% online savings account that I opened because it was 5% at the time.
There are still banks who are trying to do this. You can rephrase it as, "lending money to winners." Even better if you can lend money to an underdog winner, enabling them to borrow even more in the future. Community banks are now left with only the underdog borrowers, as the low hanging fruit is swept up easily by the megacorporation banks.
This is the POV of my wife, who manages underwriting: Community banks are having problems hiring the "A-Students" and "B-Students." This means that employees either make more mistakes, or need more rigorous support through custom software, which community banks can ill afford, and where the big megacorporation banks can handily outcompete them.
Similar to YouInvest and Chase.
I could be mistaken but business models built on interchange (I think) have been the downfall of a number of 'neo-banks' from the last 5-10 years. More recently I've seen people adopting a commercial-classified card (or other) for these types of plays for the sole reason of it attracting a higher rate of interchange vs a typical consumer debit card.
My rough calculation based on the data here suggests it would be at least 60% lower than that:
$200 x 12 months = $2400 txn value
$2400 / $35 = 69 transactions
69 * $0.35 = $24 interchange fees
What am I missing?
Cant see this lasting long
Furthermore, many boutique investment business exist for purposes of client services and plausible deniability on part of the client’s board.
I’ll give you a concrete example from when I worked in an asset management company. One client was a large pension fund for a state’s retired firefighters.
We showed them time and again a variety of enhancements to the basic portfolio construction product they bought from us, particularly in line with their overall goal of balancing investment in certain sectors across different asset managers to reduce risk.
They were not interested, not even on the basis of paying reduced fees for a simpler process. We also talked to them at length about why using a concentrated benchmark for that product (SP500) was a bad idea. Again, not interested.
After some months where our performance was pretty flat in that portfolio against SP500, pretty much as we told them we predicted it would be, they fired us.
In the client exit interview with two members of their board, they basically told us that each year they have to fire a certain number of the asset managers they do business with, in order to appear proactive and justify getting bonuses for taking action.
They obviously didn’t say this directly, but it was clear enough. They ended the call by saying they would be super excited to review re-investing with us later the next year, presumably at which time they have to do musical chairs with which asset managers they hired & fired to look proactive again.
Internally, some of my older mentors on the portfolio management team badically said this was the business. Nobody cares what math you use for investing at all. Everybody just uses super stupid linear regression based on outdated factor models from 40 years ago, all using the same data from the same big data vendors.
As long as you have hilariously over-credentialed PhDs selling linear regressions based on momentum or price-to-earnings, the clients are happy because you are cover-their-ass hire & fire insurance to them, nothing more.
It would not be hard at all for skilled amateurs to outperform these shops.
Of course they're greedy, but sometimes it's easier and more "natural" to make more money by rising fees, as opposed to deeply changing a modus operandi.
If Robinhood allows users to simply park their money, they could be in for a world of hurt.
Asking around, I consistently heard that Monzo's competitors like Revolut are going to be a future case study in scaling before great product/market fit. I don't know how many people have Revolut accounts, but nobody seems to be using their cards in public.
Little details really add up. For instance, Revolut didn't have contactless support for a while, which meant people could not use it on the Tube. Monzo made their cards pink, which creates a physical network effect.
The US seems to have a wave of startups trying to reinvent checking accounts right now. I wonder which, if any, will take the market:
- Varo (https://varomoney.com) - Product and brand don't look very polished and they haven't launched Android support, but they are doing the "hard thing" of getting a bank charter (rather than having a partner bank, like all of the others).
- Robinhood (https://robinhood.com) - Already offers investment products, so they can get a lot of users quickly. Unclear how good the product will be. (For example - can they support contactless payments with a clear card?)
- Chime (https://chimebank.com) - Seems to have the most mature and polished product. The killer feature they advertise is "get direct deposits faster", which doesn't seem world-changing to me.
My benchmark is Charles Schwab Bank, which offers no fees on any ATM, anywhere. It's what many millennials that I know use. But, it's a bad product and not very user-friendly. Simple tried to reinvent banking, but they never seemed to go beyond polishing the UI. I'm curious to see what the future holds, particularly as some foreign banks expand to the USA!
Why do you say it's a bad product? I use Schwab as my main account and it works great for me.
My direct deposits go there, but I moved all my investments over to Interactive Brokers since Schwab doesn't offer (to my knowledge) portfolio margin and Schwab's margin rates are usurious.
The opportunity here for a startup bank is to replace credit card spending in the USA. The potential earnings are huge if you can get consumers to spend on a debit card instead of a credit card (because the rake is higher).
To make a checking account capture the spending market in the USA, it needs to feel premium and focused - like the Amex app. The spending analysis needs to be great, the card needs easy control in the mobile app, and it needs to inspire confidence. It also needs to feel like a trusted, approachable brand.
Schwab makes most of their money on investments. I don't foresee them trying to give mass-market appeal to their checking account, separate from the investment account.
A case study in this field is Marcus, a savings app from Goldman Sachs. If Schwab spun out their checking account into a separate sub-brand with branding that appeals to millennials and had a spending-focused mobile app, I could see them doing really well: https://www.marcus.com/us/en/savings
Isn't that the wrong perspective on a financial product? I agree that good design is important, to a degree. Once a certain level is hit, you're not going to gain/lose very many customers based upon the UI.
I don't think anyone should favor one bank over another for emotional reasons Also, I'm not sure design differences qualifies as "emotional"; I think a better word would be "design" or "aesthetic".
If Bank A offers you a 4% interest rate on a loan and Bank B offers you a 4.1% interest rate on a loan, I think most people would pick Bank A over Bank B (assuming fee structures and customer service is more or less equal). Even if Bank B has a beautiful UI as opposed to Bank A's equally functional but okay looking UI.
If only those were the options. I'm considering dropping one of my banks after their mobile-first aesthetic redesign that made their website drastically less functional. (Less information density, more clicks to accomplish anything, extreme non-obviousness of how to access various features.) It's been a year or two, and functionality remains significantly degraded compared to their old website.
I think the converse is true. Card issuers earn 1 percent points higher interchange rates on credit cards (2.60%) than debit cards (1.60%).
Being able to make a large purchase on debit means you can afford it right now-- just as dropping a stack of $100 notes would signal.
In contrast, paying with credit can be a pose-- you look like you can afford the $1000 purchase, but it hides the dark secret that you'll be paying for it well into the next decade.
For me the killer is no foreign transaction fees. If Robinhood allows world wide ATM + no foreign transaction fees I'd switch in a heartbeat. I dont use Schwab for equities, I use Robinhood & Wealthfront
It's really a crap shoot if any specific retailer supports contactless, no major metro system that I know of support direct debit / credit contactless cards and no major bank or credit card company issues contactless cards.
If you want to use contactless in america, you add the card to apple / google / samsung pay and use your phone for NFC payments. I get a feeling that america will do a 'leapfrog' in contactless and go directly to smartphone only contactless cards than ever issue a contactless card in the mass market.
Why? (I think they're all run by the same company, HMSHost, who, AFAICT as a traveler, has a monopoly on airport food.)
In Canada we had none of that.
Citibank's Costco Visa card is contactless
Chase is about to add it to all their cards.
I've already switched to Apple Pay anyway.
Monzo is a licensed bank in the UK, and Revolut is not.
Still, Revolut has about 30% more customers in the UK than Monzo, and about 3x more in total, since it's available in the entire EU. And, unlike Monzo, which is still losing money, Revolut has been profitable since February 2018.
That's because Revolut does much more than Monzo. It provides multiple premium account types, virtual credit cards for online payments, business accounts with open API access, credit, insurance, and soon – fee-free stock trading like Robinhood.
Simple closed my account with no notice or recourse, because they failed to notify me that I needed to update some information.
I honestly can't believe I trusted my money to people so incompetent at even the basics of business.
Square's Cash App + Cash Card is taking the lead here, IMO. Card, direct deposit, ATM usage, p2p payments, rewards program.
They've been the #1 app in finance all year on the Apple store, and were #1 in all free apps for a little while this past week. They are massively popular in the south, but the rest of the country may catch up, but I sort of wonder if silicon valley is gonna miss the rise since its out of sight for the time being. For growth and reach see for example:
Graph over time: https://trends.google.com/trends/explore?date=all&geo=US&q=c...
States where cash app dominates so far: https://trends.google.com/trends/explore?date=today%201-m&ge...
If Cash App introduced brokerage services it would be over for Robinhood.
When I talk to friends for p2p payments, people mostly use venmo, then messenger & apple pay and nobody uses square cash.
I had simple for a while and the UI was great, app is best of the ones I've seen but they never had anything else (they recently created a savings account) and no checks got annoying to deal with.
My Bank of the future would have these features:
- Full brokerage account with available trading and zero fee index funds
- Free checks
- Free wiring/ability to send money to other people's bank accounts
- Really good app (like simple's)
- Decent interest like Robinhood has here without having to separate things into a savings account
- No fees
- Credit card to rival Chase Sapphire Reserve or AMEX Platinum with tightly coupled integration into the existing app software.
- All ATMs are free (rarely use, but nice to have and Fidelity does it).
- Ability to get loans
Fidelity has nearly all of these things with some negatives:
- App is not that great/UI is bad
- Their credit card is bad and not well integrated into their software
- Interest is poor
Haven is a new startup that's has a pretty cool approach to helping people do the optimal thing with their money (like an automated r/personalfinance), but I'd rather just be able to do it directly with the people holding the money.
I'd take another look at Simple. I've been with them since the beginning and their recent enhancements are fantastic! Expenses tied to your pay schedule that automatically set money aside, same with goals. and then the big one for me was an interest bearing savings account, yielding 2%.
See more here:
They are a definite contender for your list.
The math itself doesn't matter. Have you seen recent Robinhood commercials popping up on TV? Their whole business is to encourage folks that should not be day trading to day trade.
Having your money parked there just facilitates knee-jerk-reaction and follow-the-crowd trading.
Trading for most people used to be deliberately obtuse. $7.5 commission per trade is criminal for most people, so is charging $50 a month to get a weekly email with basic technical analysis, but that's literally been the bread and butter of retail investing for decades and no one bats an eye to how deliberately ridiculous it all is.
Robinhood drops all the barriers from buying stocks, gives you a warning before they even let you touch options, and they are the evil here? This is like saying venmo is dumb because it lets people wipe out their checking account quicker than writing a check; don't blame the company for idiotic users. Robinhood doesn't even let you day trade more than 4x in a given week unless you have 25k in your trading account, just like every brokerage.
When Robinhood initiates options trading by asking you, "Do you think the stock is going to go up?" on a phone interface, they've decided that trading is now just for morons.
Imagine on iOS you randomly gets a pop up "do you think gold spot is gonna be above 1250 in 2 hours?" -> long tap the notification directly place an order
Naked, covered, and cash secured are terms used to describe how you are covering your downside when you are selling options.
When you buy an option, your downside is always the cash you spent on the option, so you don't have different types of purchases. When you buy you are just buying an option.
As for Robinhood, they don't allow for selling of naked options, only covered and cash secured.
Buying stock with dividends helps even more, now you get money back to invest into more stock :-D
Everything else is in index funds.
Also using the ridiculously upside down moral convention that they are somehow 'the good guys defeating the system' i.e. 'Robin Hood'.
"We wanted to do something after occupy Wall Street, you know. Something real. So, how about, get all the young people to, you know, put their money into Wall Street" is basically their 'storyboard motivation'. Which the CNN interviewer accepted without a hint of skepticism.
If it was 1996, these people would be speculating on Beanie Baby portfolios hedged with Charizard cards.
I was locked out for 29 hours with expiring strangles that would have had significant upside if closed at the right time, lost everything put into them by the time I could get back in.
Never received communication about the lock out or being allowed back in.
They have no phone support and during that whole period not a single email was responded to.
To imagine this company as a bank is one of the most ridiculous concepts ive heard of.
There's one guy on there who lost nearly a million bucks. And another one who I believe has lost more than that, and hasn't posted a single thing in three months, since he finally made it all the way to bankrupt. Makes you think a little, I wonder if he's still alive.
I did learn that options are super exciting and a great way to lose every last penny. I got lucky and came out ever so slightly ahead on my run through WSB, but I got out of it and now I'm back to normal stocks even with my play money.
Buying stocks isn't really investing, it's more akin to gambling like Poker, with all other investors at the table.
Many of those investors have massive computers, R&D firms, brilliant minds, 'inside information', and relationships with those companies and CEO's.
So what 'millenial' is going to trade better than those?
Zero. Or at least in the long run.
The only way to 'beat the man' is to have more knowledge than Wall St. and that is extremely rare.
So what 'Robin Hood' does is sign up fish to feed to sharks.
It might make sense to put a chunk of savings in a broad array of stocks (some in bonds, some in gold, some in cash etc.) - but 'trading' against Wall Street is about as smart as playing Poker against the best in the world thinking you're going to win.
Also don’t touch or put more than 3% in options or crypto. 80% of traders lose money with options and crypto doesn’t usually generate interest or dividends. Also crypto taxes were absolute difficult nightmare for me last year.
Congratulations, you just reinvented the S&P 500.
Less cynically, it’s building a book of investors who have likely never lost money in the stock market.
Knowing that RH gambles your money, it gives them plenty of profit :)
Even on the institutional side, the business is setup to encourage investors to change their mind as much as possible. More trading equals more soft dollars equals getting a larger budget for research. More trading/using more esoteric products means you’ll get more help from Cap Intro to raise money. It takes a lot of restraint to invest like Buffett.
See also E-Trade's "Don't get mad, get E-Trade" commercials, which are clearly intended to give people the impression that stock trading will make them Super-Yacht rich.
The real story is that the plebes realized they could make 2% per day by day trading and selling short. I did this with my dad and we were up about $40k before 9/11 wiped out most people's gains (this was back when Apple stock was in the $12-20 range). Edit: my dad never sold short because he felt it was unsupportive of companies, but had he done it to balance each of the buy/sell targets I gave him, he would have been up $80k.
I remember being demoralized that I couldn't trade on margin because I would likely never be able to save $25k with my student loan and credit card debt. But if I read the rules correctly now, I don't even think you can sell short anymore unless you have $25k.
This keeps the real day trading profits back in the hands of the rich and I feel that it could/should be challenged as discrimination. Also it breaks the ZOI rule so doesn't sit right with me..
The rules were put in place to protect people from being lured into day trading by day trading service companies. The thought was to prevent people from spending their rent money thinking they were going to get rich day trading. Also, trading with small amounts of money pushes people into penny stocks, which is an even faster way for someone to lose all their money.
BTW, since the money is so easy you could always have traded futures which are exempt from PDT. https://www.tradingsetupsreview.com/futures-trading-best-opt...
One of the charts in etrade said we were up $40k over about a 4 month period and my dad had about $50k in play, trading on margin so working with about $100k. So the real return was more like 80% over 4 months, so I guess 240% for a year although I don't know if I'm doing that math right.
My biggest fear most days was honestly that there wasn't going to be enough volatility for the stock to move, meaning we threw away $7 to $28 on trading fees. I was moving furniture at the time and only made $80 on a good day so that was a lot of money for me then.
If you short high beta tech stocks on margin as you mentioned in your post, you'll get wiped out really fast. Go to Wallstreetbet subreddit and pull up the thread where a guy lost 1.5mm this year, he lost it shorting high beta tech stock that did a swing of 10% in the wrong direction forcing a margin call and a liquidation.
If you wanted to capture the downside of a stock, you can buy puts without a margin account. You should probably really understand the market better before you expose yourself to a larger risk than the money you put in.
The rules were approved in February 2001, so they can't have been a response to 9/11, kneejerk or not.
Can you please elaborate? I'm curious. Why was the money so "easy"? Simply because there were so many amateur traders?
Also we bought right after the dot bomb happened on 9/29/2000 when most all the tech stocks fell by half or more in one day, so there was a constant upward trend where people wanted to start gambling in stocks again over the next year:
You can see the drop here, I can't figure out how to share, but enter something like 9/28/2000 through 9/30/2000 in the date range:
You have to remember that these events aren't random. I personally feel that they're controlled by whoever holds the purse strings, so a handful of extremely wealthy illuminati were getting nervous towards the end of the dot com and housing bubbles and made the call to pull the plug so they could re-buy after everything crashed (see: It's a Wonderful Life).
We're overdue for that with the mobile and web 2.0 bubble. The main difference today is that older folks like me remember the lean times so more startups today have pulled themselves up by their bootstraps and are somewhat immune to these market manipulations vs propped-up brands like pets.com in the 90s. But don't think for a second that crashes (or booms) like these with a 50% move in one day can't happen again.
As long as I'm on my soapbox, I wish that I could dabble in a little machine learning and look for correlations that tend to swing together or oppositely one another. No matter how much the bots tend towards noise, there are still markets that are connected that should be easy to spot. I don't know what else I would try though because I stopped following the market after the housing bubble when people started trading foreign currency and Bitcoin etc. I could have bought $20,000 worth of bitcoin when it was $10 so it's all just monopoly money to me now. I feel that chasing easy money is maybe distracting us from real human progress. But what do I know, I'm just the poor sap stuck in the universe where I never made it big hahah.
They find gaps in the financial institutions' way of doing business and fill the space.