Robinhood pulls bank charter application

Dive Brief:

Stock-trading app Robinhood has pulled its application for a bank charter with the Office of the Comptroller of the Currency (OCC), the company said last week.
The Menlo Park, California-based brokerage firm, which said it submitted its application with the regulator in April, told CNBC the decision was voluntary and does not reflect a change in the company's product plans.
"Robinhood will continue to focus on increasing participation in the financial system and challenging the industry to better serve everyone," a company spokesperson said. "We appreciate the efforts and collaboration of all the parties we worked with throughout this process."

Dive Insight:

Robinhood's decision to pull its banking charter application comes after the company has made several attempts to launch bank-like products.

The fintech announced in October that it would offer a high-yield cash management account after it failed to launch the product in mid-December last year. The new feature has not yet launched.

The company halted its first savings account endeavor after it neglected to notify the Securities and Exchange Commission (SEC) or the Securities Investor Protection Corp. (SIPC) ahead of the launch. A day after the announcement, the company said it would rebrand and rename the product following pushback from regulators.

Robinhood said it is partnering with Federal Deposit Insurance Corp. (FDIC)-insured banks such as Goldman Sachs, HSBC, Wells Fargo, Citibank, Bank of Baroda and U.S. Bank to offer the 2.05% interest rate account.

A national banking charter would allow the company to provide bank products and services on its own.

Robinhood may have pulled its charter application because the company has not yet reached the size needed to own a bank, banking analyst Dick Bove told the San Francisco Chronicle.

"The minute I get a bank charter, I have to deal with a ton of regulations," he said. "Life is a lot easier without a bank charter until you reach a certain level."

A company would want $3 billion to $5 billion in client assets and at least $100 million in cash in client accounts for a bank charter to be worthwhile, Bove said.

"At that level, you might want FDIC insurance to make sure people are putting their money with you," he said.