Robinhood is an application that allows users to trade with no commission, making investing easily available to those without bank vaults of cash. By targeting novice traders that don’t have overflowing pockets, Robinhood is extremely popular with millennials and younger generations who want to dip their feet into the world of investing.
How does that work?
Robinhood profits through interest on the idle cash of investors, by loaning it to others and gaining the interest when paid back, similarly to banks. There are also charges on certain services. Another source of revenue for the company is premium accounts, and essentially margin lending. Margin lending is the concept in which Robinhood allows investors to trade with more money than their cash balance, but they must pay a fee in order to do so.
Recently, Robinhood has become a huge target for hackers seeking quick cash. Hackers can use any user’s credentials to siphon their profit from stocks into their own external bank account. After many users suffered from this, they reached out to Robinhood support, but received little to no help in response.