The free stock-trading app Robinhood is taking all comers

The wait is over.
The wait is over.
Image: AP Photo/Patrick Semansky
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You no longer need to stand in line to use Robinhood, the millennials-focused commission-free stock-trading app.

Since the company started in 2013, its app has been so popular that the company set up a waitlist. Now that list (which stood at 50,000 or so, a spokesman tells Quartz) has been scrapped and everyone on it has been invited to use the app, the company wrote in a blog post.

Robinhood is one of a host of financial technology startups—so-called “robo-advisors” such as Wealthfront and Betterment—hoping to lure younger investors away from stalwarts such as Charles Schwab (which recently launched its own robo-advisor service).

Robinhood’s waitlist was a well-known phenomenon in some corners of the finance-centric internet, and gaming it had become a spectator sport. The loophole that allowed this was a provision that let wannabe users skip the line if they got people to sign up behind them. The company found itself going in to clear out fake emails used to trick the system, Robinhood co-founder Baiju Bhatt tells Quartz.

“There were definitely people who were algorithmically referring people,” he told Quartz. “They were writing scripts to move up the waitlist.”

The problem became so widespread that the r/finance community on Reddit banned users from posting the “referral codes” that were the scheme’s mechanism, because so many of them kept popping up.

Why didn’t the company just let in all comers from the beginning? Easier said than done. The process was slowed both by regulatory hurdles and, strangely, by the selfie-taking tendencies of millennials.

Because operating a brokerage means more regulatory scrutiny than the typical app, Robinhood couldn’t just register people instantly. The Patriot Act says a service of this type has to make sure its customers are real people, and Robinhood used information such as social security numbers and addresses to cross-reference customers against credit bureau databases and ensure they weren’t laundering money or doing other nefarious things.

Since Robinhood’s target audience skews younger, many didn’t have a lot of credit history to go on. That meant that as many as 10% of the registrations bounced back, spokesman Jack Randall said, and required further documentation—often a photo ID. So the company added a photo requirement to its signup process. But then folks started uploading selfies instead of their driver’s licenses, causing more headaches.

Now the company has solved this problem with a technical trick: It added a rectangle to its photo process that lights up when a customer properly frames an ID, to clear up any confusion. Now the bounce-back rate is down to 3%, Randall said, enough of a reduction to knock down the gates and say, “come one, come all.”

Whether an app that lets people trade stocks for free instead of charging them $7 or $8 per transaction is a sustainable business model is another question—but to those millennials flooding the platform now, that’s neither here nor there.