Investing platform Robinhood added more than $3.4 billion through its automated customer account transfer service in the first quarter, up 100% quarter over quarter.
The company is seeing high deposit volume “supported by a young customer base gaining share of global wealth,” and expects to meet its multi year 20% deposit growth rate target, Chief Financial Officer Jason Warnick said during the company’s earnings call May 8.
The Menlo Park, Calif.-based company reported net deposits of $11 billion for Q1, more than double last year’s quarterly average, he said.
Robinhood has gained deposits from existing and new customers along with winning customers from incumbent financial institutions, Warnick said.
Deposits were “75% contributions from customers and 25% net wins from incumbents,” Warnick said, adding that the company had $5 billion in net deposits in April.
Deploying tech for deposits
According to a May 2023 report by NASDAQ, more than half of Gen Z Americans hold investments of some kind due to ease of investing and simplified access to financial information.
Major financial institutions including U.S. Bank, TD Wealth and Envestnet have deployed automated investing solutions to entice customers to keep their accounts at traditional FIs rather than moving to fintech platforms.
U.S. Bank is giving customers $100 to open an Automated Investor account, according to the bank’s website.
TD Wealth launched its automated investing solution, Robo-Advisor, in October 2021.
Banks are seeing outflows from customer accounts to investment fintechs like Robinhood as more people jump into the equities market for better returns, Dani Fava, told BAN when see was working as the group president for product innovation at wealth tech company Envestnet. She left the position last month.
“Deposits are hard to come by this year [and automated investing offerings are] a method to drive engagement and a method to retain deposits” Fava said. “This is a method for the banks to keep money in their ecosystem and to drive engagement.”
Robinhood expanding offerings
Robinhood is expanding its product offerings and has gained traction with the launch of its Robinhood Gold credit card in March, which has more than 1 million applicants on the waitlist, according to the company’s earnings report.
Nearly half of banking customers are seeking a one-stop-shop experience for their financial needs, and Robinhood’s “introduction of credit cards aligns quite well with this demand, especially having launched checking, high-yield savings and retirement accounts recently,” Sean O’Brien, principal consultant of wealth management practice at consultancy firm Capco, told BAN.
