Talk to us about the launch in the UK and your ambitions for Europe.
What are the timings that we're thinking about?
Yeah, so we are launching imminently to the initial set of customers in the UK,
and what we're launching is a commission free share trading of US stocks and
we're also launching a 24 hour trading, which is a unique proposition.
We launched a product in the US earlier this year called 24 Hour Market, which
was the first we became the first major broker to allow round the clock trading
of individual stocks. I think that's particularly useful for
consumers here because there's just less overlap between waking hours and US East
Coast working hours. So that'll that'll just make it a lot
more usable and a lot more welcoming for for customers to invest here.
We are also launching 5% ADR on an invested cash.
So the intention is for the UK market Robinhood to be the best place to invest
in US stocks and US dollars and we believe we can fill that need better
than anyone else. And this is happening imminently.
So in the new year, is that fair to say in terms of the timeframe for this
launch where the waitlist is coming out and we will plan to roll out to the
initial set of customers in the coming days, actually in the coming days.
What is the market opportunity for Robinhood here in the UK?
Well, I think that if you look at how we've done in the US, after less than
ten years, about eight years of general availability, we've brought on board
over 23 million customers. So 23 million customers with money in
their accounts on Robinhood. About 10% of the adult population, which
is tremendous. It took competitors decades to reach
that number and very few have. So I think if we can get similar success
in the UK, I think there's there's a lot we can do here and there's a lot of
value we can add to the market, as you probably know.
Back in 2019, the entire brokerage industry in the US replicated our model
by going to Zero commission, and that actually led to savings for tens of
millions of people, not just those with Robinhood accounts.
Anyone that had an account at a legacy financial institution or discount broker
was now not paying commissions or fees for trades and retirement accounts, for
instance. And so if we have a similar impact here,
I think that could result in lots more money back in customers pockets at a
time they need it. They need it the most.
I just want to push you a bit on the market opportunity.
What are the kind of numbers that you're targeting by the end of next year, for
example, out of the UK in terms of customer acquisitions, in terms of total
numbers or volumes, what what are you looking at at the targets?
I mean, the the way we think about it is this is a long term opportunity for us.
We've we've spent time building the platform, a technology platform that
will expand that allow us to expand internationally as a software company.
Every time we build new things in the US will accrue to customers in the UK 24
hour market being a prime example, along with the high yield offering.
So this product that we're launching now is probably the the best version of
Robinhood, and we intend for it to keep improving.
And since we are expanding as a technology company and we're building
all of this in-house, organically, the actual cost of making the platform
available in each market should continue to decline and we'll be able to get more
leverage as a result. So I think
over the long run we intend to do quite well and I'm thinking about it less in
terms of like what are the targets in the next couple of months or even one
year. But I think
I aspire for Robinhood to be a global company.
That's been the plan from the very beginning because you and I started this
company as immigrants and children of immigrants.
And so the idea of making our services available, making really the best of
financial services from anywhere in the world available to anyone, anywhere in
the world with a smartphone is just the vision I've had in mind from the very
beginning. And it starts with the UK.
And you talked about about 10% of the US population that is now, is that correct?
About 10% that are using. We have we've got over 23 million
customers, 23 million cars, roughly 10% of of adults as adults.
So about 10% of adults here in the UK would be something you'd be looking at.
I mean, I think that would be that would be a great outcome and I don't think
unrealistic and that will take a year. But we're going to build towards serving
every individual in the UK. Okay.
You mentioned the fact you're a decade old, 2030.
Seen was when you found it. Why is it why is it taken a decade to
break into the UK market? I mean, I think that the reality of it
is the US is so big and there's so much to build that
it's always sort of a tricky proposition.
What what do you prioritize? And
we were about to launch in the UK a couple of years ago.
It was March of 2020 and then we had a little bit of a curveball, didn't we,
with with a global pandemic and. At the time, we didn't know exactly how
things were going to shake out, how long it was going to last, how disruptive it
would be to the economy. But what we did see was basically a
tripling of activity in Robinhood within a very short amount of time.
So we had to make the difficult decision to postpone this launch because we were
putting in all of the resources we possibly could to dealing with the surge
in demand and making sure our infrastructure was scaling in the way we
needed. And
we made those changes, made those improvements, invested dramatically in
the service quality, the infrastructure offering.
Now, we're in a much stronger place, too, to actually serve the market with
not just a better product with all the new features I mentioned, but but also a
much stronger infrastructure. And how do you expect to be turning a
profit in the U.K.? 0% fees.
You're doing 5%. ADR, as you mentioned, is it going to be
partly subsidized by by the US customer base or are you focused on turning a
profit in the U.K.? And how did you do that?
Well, there's two ways I think, about it.
First, since this is leveraging our core platform from the US, the the cost of
servicing additional customers in the UK is is lower than when we launched in in
the UK in the US initially because we already have the the core infrastructure
and platform capability and the technology in everything we build in the
US accrues to the UK. On the revenue side, even though payment
for order flow is not permissible in this market, we've diversified the
business tremendously. And so in the US you've seen us launch
Robinhood Gold with 5% API. We've launched stock lending, which is
good for customers. It allows them to earn passive yield on
their stocks even when they're not trading and is also a revenue source for
the firm to the point where now more than half of the revenue of the firm is
actually interest income. Payment for order flow for equities is
right around 5%. And so
we believe that that will allow us to continue that path.
On the UK, we have a diversified business.
We can offer tremendous value to customers here while also building a
sustainable, growing, profitable business, leveraging the technology that
we've built. And talk to us about your conversations
with UK regulators. How welcoming or not have they been to
your presence here? You've been meeting with officials in
the UK. They've been very welcoming.
I mean, we've we've been pleased, as we talked a little bit about before the
interview, I was pleased to be at the GIZ, the
Global Investment Summit here earlier this week.
And what's been abundantly clear is that the regulators, the lawmakers, the
officials here are laser focused on making the UK the best place to do
business. And they're making investments.
They want to bring in companies. They care very deeply about capital
formation. And you know, we are committed to going
to the UK many years ago, but I'd say the climate and the optimism
has only improved and we're very optimistic about the market and and what
the future. Who do you see as the biggest
competitive threat? Is it is it the incumbents like
Hargreaves Lansdown or is it the startups like Monzo and Revolut?
I mean, I don't think there's any one that's serving the specific needs that
we believe we can serve better than anyone, which is providing the best
access to US stocks and the US dollar in the easiest to use possible interface
for retail customers. Our customers are younger, they're early
adopters of technology. They're sort of digitally native.
They like to be in control of everything.
They don't like to be talked down to and told that, you know, you need to talk to
an advisor or an expert to manage your finances.
And I don't think anyone is addressing that particular niche.
Even in the UK, there's a cultural shift as well that maybe you'll have to
address, which is that we're more risk averse, we trade less, there's less of a
retail investor base in the UK and Europe.
So you're going to have to close that gap, right?
We do offer 5% air on on invested cash with, to my knowledge, so very, very
competitive rate here in dollars with over 2 million in FDIC insurance
protection. So we have products for customers that
who have low risk appetite for financial risk as well.
And I think we can serve their needs. But I think there's two things we do
exceptionally well in the US that carry over in the UK.
Despite any cultural differences, people in the UK love easy to use.
Mobile interfaces. And they love getting the best possible
economics on investing and other financial services.
And I think these two things have been the cornerstones of Robin Hood product
design and development. We have really a beautiful our customers
love the beautiful, almost magical quality of the Robin Hood experience,
and they appreciate the the fact that they're getting industry leading
economics. And when we talk to customers in the
U.K., they're there's a lot of enthusiasm over bringing these things to
this market. Has crypto bottomed, do you think?
And is it still being in the crypto space, given what's happened with the
likes of Binance and FCX? Or is that an opportunity for Robinhood
to take market share? I think.
In the long run. It's it's certainly an opportunity and
it's good for the industry to have unscrupulous actors weeded out and kind
of falling off because I think in order for the industry and the technology to
become truly globally accepted, there has to be a foundation of regulatory
compliance and it has to be integrated more and more into the traditional
financial system and help solve real problems for people.
So Robinhood continues to build crypto technology and be a leader there.
We've been pleased with the growing market share we've been seeing in the US
even through the winter. And as you probably know in the U.K.,
we're not launching with crypto. We're very focused on U.S.
shares and in the high interest product with no affects fees.
But we are also expanding in the EU and we will have crypto available in the EU
in the coming weeks. And last one on volumes for the business
overall, particularly with the US volumes, what are volumes looking like
in terms of in terms of trading volumes? Are they starting to turn around looking
better? What I announced in in Q3 was that we've
seen market share continuing to increase across all of the all the assets that we
offer equities, market share options, market share
both increased year over year and three quarters sequentially.
So it's a little bit hard to disentangle from the data as higher rates have
caused the overall trading environment and volumes to decrease.
But we're using that as an opportunity to both diversify our business away from
trading and grow market share and consolidate because we know we're in a
cyclical industry. Things ebb and flow, interest rates
change all the time, so we have to diversify to take advantage of the
current environment that we're in. But we're also continuing to invest in
the core business of trading because when when the cycle turns in the other
direction, we think we'll be excellently positioned to benefit from that and
consolidate our leadership even more.