Robinhood debuts debit card after settling with state regulators

Robinhood debuts debit card after settling with state regulators
The Menlo Park, California-based company announced a new debit card last week, complete with a spare change investing feature, after reaching a settlement with the Vermont Department of Financial Regulation over lax oversight and service outages.
MAR 28, 2022

In a busy month for Robinhood Financial, the online brokerage announced new banking and investing features for clients, including a new debit card, while settling a lawsuit with a state regulator over lax oversight of its products.

The Menlo Park, California-based company announced a new debit card last week that includes a spare change feature that helps customers invest after every purchase by rounding up the sale to the nearest dollar. The Cash Card lets customers invest their roundups in both stocks and crypto, and offers bonuses of between 10% and 100% on their weekly roundups, although the amount is capped at $10 a week, according to the website. 

For years, similar strategies have been offered by competing fintech apps, including Acorns Grow Inc. and Stash Financial Inc., and even by more established providers like Bank of America Corp.

In a January earnings call, Chief Executive Vlad Tenev had said that Robinhood would be rolling out a new debit card in the coming months, adding that customer deposits and withdrawals totaled $136 billion in 2021. “We want to give customers faster ways to move their money,” he said.

Earlier this month, a developer uncovered source code in the app that allegedly showed a new feature that lets users loan out their stocks to other financial institutions, known as fully paid securities lending, Bloomberg reported. Fidelity Investments, ETrade and Charles Schwab & Co. Inc. all offer existing products that let customers earn passive income by loaning out stocks.

During the earnings call, Tenev said that while the company is still in talks with regulators, he hopes to launch the stock-lending program during the first half of this year, as part of a larger mission to grow revenue streams beyond Robinhood's more traditional brokerage business.

The new products come amid notable probes into the company’s oversight, and a settlement with one state regulator this month concerning options trading and outages the app suffered during the bout of market volatility in March 2020 caused by the Covid-19 pandemic.  

Robinhood reached a $640,000 settlement with the Vermont Department of Financial Regulation, which said at least 40 customers in the state had complained to the regulator or Robinhood, according to a statement released March 17. 

“Robinhood and other fintech platforms have broadened access to financial markets and introduced investing to many for the first time,” DFR commissioner Michael S. Pieciak said in a statement. “Yet at the same time, fintech firms must ensure they can service their growing customer base and comply with our regulatory requirements.” 

Latest News

Advisor moves: RBC lands $1B UBS team in Pittsburgh
Advisor moves: RBC lands $1B UBS team in Pittsburgh

Elsewhere, Wells Fargo Advisors adds a $400 million Morgan Stanley veteran in Naples as an ex-Cetera advisor goes independent with LPL

GWG’s Heppner hires Puff Daddy’s attorneys as criminal sentencing looms
GWG’s Heppner hires Puff Daddy’s attorneys as criminal sentencing looms

According to a federal charges Bradley Heppner, 60, received more than $150 million in payments through funneling money from GWG Holdings to a shell company.

Investors accuse Broadstreet fund of alleged billion-dollar 'Ponzi-like' scheme
Investors accuse Broadstreet fund of alleged billion-dollar 'Ponzi-like' scheme

A $1B fund allegedly skimmed 30% off the top, then swapped cash for locked-up stock.

Lawsuit alleges Skechers founders manipulated $9.4B buyout to shortchange investors
Lawsuit alleges Skechers founders manipulated $9.4B buyout to shortchange investors

Insiders allegedly rewrote projections three times in four days.

Fintech bytes: FINNY signs Visionary Square for pay-as-you-go AI prospecting program
Fintech bytes: FINNY signs Visionary Square for pay-as-you-go AI prospecting program

TCI Wealth Advisors also has also tapped JIFFYAI to unify onboarding and servicing, while TradePMR adds ICE market data to its Fusion advisor platform

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor