An American trading app that helped spark a stock-buying frenzy during the pandemic is coming to Britain.
Robinhood has opened a waiting list for UK residents, who will be notified when they can sign up for early access. The low-cost platform is expected to fully launch in early 2024.
The UK launch will focus initially on giving customers access to more than 6,000 US-listed stocks such as Tesla and Amazon. The product offering will later be broadened out to include trading of London-listed shares. Robinhood is also aiming to offer a stocks and shares ISA in future.
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The trading app is arriving on our shores after a series of false starts. It previously planned to open in Britain in 2020 but abandoned the attempt to focus on high demand in its home market. Last year it also tried to enter the UK by acquiring Ziglu, a British cryptocurrency firm, but later scrapped the takeover.
The UK launch marks Robinhood’s first overseas expansion.
Jordan Sinclair, the president of Robinhood UK, told the PA news agency: “We couldn’t be more excited to launch in the UK.”
He said the investment market is “still dominated by traditional brokers” who charge high fees to invest in the US and other overseas markets. “People’s needs still aren’t being met in the UK… it feels like change is still needed,” he said.
How does the Robinhood app work?
The app does not charge commission or foreign exchange (FX) fees to buy and sell stocks, and people can start building an investment portfolio with just one US dollar (79p).
Users of the app, which is regulated in the UK by the Financial Conduct Authority (FCA), can also earn 5% interest on uninvested cash, which is converted from pounds to dollars.
Robinhood users will be able to trade outside of market hours, with a 24-hour service five days a week, which Sinclair described as a “game changer” for retail investors.
Sinclair was hired as UK CEO back in July. He previously served as managing director of the European fintech Freetrade.
Robinhood went public in 2021, raising close to $2 billion.
A free share-trading app - sounds great, is there a catch?
Robinhood has become very popular after rising to prominence during the lockdowns of 2020, but it has also been controversial.
Thanks to its motto of “democratising finance”, the app attracted a cult following among younger punters. It also became the trading app of choice for investors swept up by the meme stock craze in 2021.
US video game retailer GameStop was at the centre of a phenomenon that saw novice investors buy large volumes of shares in a battle against professionals who were betting against its share price falling.
People swapped tips on forums and used apps like Robinhood to buy shares in the company, causing its share price to fluctuate wildly.
The app was said to have “gamified” investing for young people, who were drawn to its user-friendly interface and fee-free trading.
It was then handed a $70 million penalty by US regulators in 2021 for breaches that inflicted “widespread and significant harm” on its customers.
Sinclair said Robinhood has “grown and matured” since the events, and that it targets people of all ages investing for the long term.
Having said that, the app’s model of making investing accessible and approachable has undoubtedly driven its growth. The company claims to have more than 23 million users.
While the app will be cheaper than most investment platforms here, like Hargreaves Lansdown, AJ Bell, Barclays Stockbrokers and Interactive Investor, it won’t be completely free and there will be some fees to watch out for.
Robinhood’s fee schedule for UK customers names custody fees, regulatory fees, trading activity fees and outgoing stock transfer fees as potential charges. The schedule adds: “When trading securities, bid-offer spreads apply in the markets and are considered implicit third-party costs.”
As it launches in the UK, Robinhood will likely face tough competition from low-cost rivals such as Freetrade, Public and Trading212 offering similar products, including commission-free trading and an accessible user interface.
Additional reporting: PA
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