Robinhood Markets Inc HOOD unveiled the Robinhood Gold Card at its first-ever keynote event this week. Co-founder and CEO Vlad Tenev explained the company’s strategy following the event.
Robinhood Gold Card: Wednesday on CNBC’s “Squawk Box,” Tenev said that Robinhood is much more than a brokerage platform as the company continues to expand financial services offerings.
“I’ve been saying for a while that what we’d like to do is build a world for our customers where all of their assets are custodied at Robinhood and every financial transaction goes through Robinhood, and credit is just such a critical part,” Tenev said.
Robinhood announced its new credit card Tuesday night, available exclusively to Robinhood Gold customers. The card offers 3% cash back on all categories with no annual fees and no foreign transaction fees, which is well above industry standards.
Tenev told CNBC the best cash back offerings that exist are around 2%, and most cash back cards offer closer to 1.5% at best. Robinhood didn’t just want to offer another “good” cash back card option. Instead, the company aimed to build something that really stood alone in the category, he said.
“Three percent is beyond what anyone else offers with no limit and no minimum balance, no net worth requirement to be part of the program,” Tenev pointed out.
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How Robinhood Makes Money: Credit cards are one of the most profitable segments in the financial services industry, Tenev said, adding that Robinhood is able to offer industry-leading cash back because of the vertical integration of the company.
There are two types of people who use credit cards. The first is the person who pays off the balance every month and uses the card to generate rewards on spending. The other type of credit card user is one who uses credit cards to build good credit, the Robinhood CEO explained.
Robinhood makes money from the monthly balances remaining on credit cards, but it’s really “all about the ecosystem,” Tenev said.
The Robinhood Gold Card is available to anyone who pays $5 per month for Robinhood Gold, which offers a suite of benefits including 5% APY on uninvested cash, 3% match on IRA contributions, lower rates for margin investing and more.
“Robinhood Gold customers are much more likely to adopt all of our other products, their balances with us are higher, their average revenue per user is multiples of a non-Gold customer,” Tenev said.
“So once someone joins Gold, they tend to increase the amount of money they put in Robinhood, they do more with us, they’re a more profitable customer, they get more value, so the idea is to just add more things to Robinhood Gold for it to be a no-brainer value proposition.”
High net worth individuals are accustomed to getting a certain level of service from their banks and other financial institutions. Robinhood Gold aims to open up that private client, high net worth experience to the mass market for just a few dollars a month, the Robinhood CEO said.
HOOD Price Action: Robinhood shares were up 2.78% at $19.82 at the time of publication, according to Benzinga Pro.
Photo: courtesy of Robinhood and Kathy Hutchins/Shutterstock.com
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