After much anticipation, the stock-trading platform Robinhood has officially launched in the U.K., marking its first international expansion following its debut in the U.S. over a decade ago.
Robinhood is kicking off its U.K. presence by granting early access to the app for those who join the waitlist, with plans to gradually open up to all U.K. users in early 2024.
The California-based company began preparing for its U.K. launch almost five years ago, embarking on a local hiring spree. Following a false start in 2019 and an abrupt halt in mid-2020, Robinhood is now making a fresh entry into the U.K. market.
Despite its troubles in the U.S., including allegations of misleading customers and various fines, Robinhood went public in mid-2021 and now boasts 23 million users domestically. However, the company is not without its controversies, with incidents like the tragic death of a student who misinterpreted a negative balance in his Robinhood account, leading to a lawsuit settled by the company.
Now, as Robinhood tries its hand at international expansion once again, it faces a changed landscape, with the emergence of local competitors such as Lightyear and Freetrade, posing challenges for the platform.
However, Robinhood faces stiff competition from newer players in the U.K. market. It is expected to target a younger audience, similar to its U.S. strategy, and later expand its reach to more experienced investors, potentially encroaching on the territory of established firms like Hargreaves Lansdown.
At its Q3 earnings report, Robinhood confirmed its imminent brokerage operations in the U.K., with plans to introduce crypto trading for the European Union (EU) markets. The platform already allows U.K. users to trade thousands of U.S. stocks, including major companies such as Apple, Amazon, Microsoft, and Meta.
Robinhood users can place trades during standard market hours and utilize the 24 Hour Market feature for limit orders on select stocks. Additionally, the platform supports American Depository Receipts (ADRs), offering investment opportunities in foreign companies not listed on U.S. stock exchanges.
Despite a competitive market, Robinhood aims to leverage its experience and user base from the U.S. to make a mark in the U.K. “The market actually really hasn’t been disrupted yet,” says Sinclair, emphasizing the opportunity that still exists for Robinhood in the U.K.
As the company navigates its international expansion, it needs to address past controversies and adapt to the unique dynamics of the U.K. market to establish a strong foothold in the region.
Robinhood Enters the U.K. Market with In-App Guidance and a New Approach
Robinhood is venturing into the U.K. market by offering in-app guides, tips, tutorials, market news, and data for novice traders. These features are aimed at equipping users with the necessary tools to make informed investment decisions without the need to navigate between multiple sources of information.
The company’s decision to provide 24/7 chat, email, and phone support from the outset in the U.K. signals its commitment to starting off on the right foot in this new market. However, despite efforts to improve its reputation in the U.S., Robinhood continues to grapple with the aftermath of recent controversies, according to Brear.
The U.K. presents an attractive opportunity for Robinhood’s expansion, given its status as a major financial hub. With this move, the company aims to tap into a market known for its significant population of affluent fintech users and a collaborative regulatory environment.
One of the key attractions of Robinhood’s platform is its promise of commission-free trades, no foreign exchange fees, and no minimum account requirements. However, questions arise about how the company will generate revenue. In the U.S., Robinhood faced criticism from the Securities and Exchange Commission (SEC) for its revenue generation model, which involves selling customer trades to larger trading firms. This contrasts with the regulatory landscape in the U.K. and other regions like the EU, Canada, and Singapore, where similar practices have been banned.
To diversify its revenue streams, Robinhood has introduced new programs, such as stock lending and retirement products. Additionally, the company is exploring the potential for crypto trading in the EU as it navigates evolving regulatory frameworks.
While Robinhood initially plans to offer U.S.-listed stocks only in the U.K., it aims to expand its offerings to include U.K. equities in response to customer demand.
Overall, Robinhood’s entry into the U.K. market represents a significant step in its global expansion strategy, with a focus on providing accessible and diversified investment opportunities to users in this new market.