We are suckers for Robin Hood. We like the story grimdark, melodramatic, furry, campy, and everything in between. We even like the man who steals from the rich to give to the poor enough to name a financial technology platform after him — perhaps a strange way to build wealth, but no judgments here.
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The Robinhood app has had a big week, first with the announcement that it was introducing a new way to do checking and savings. The biggest surprise came in its interest rate: Rather than messing with the usual infinitesimal rates banks offer (you know, why a few pennies show up in your account every quarter), Robinhood's product offers a 3 percent rate, which is massive. This is in addition to a debit card, widespread ATM access, no minimum balance, and virtually no fees.
If it sounds too good to be true, the skeptics would like to have their say. Some reporters have noted that given the way the Robinhood product is structured, the money put into it actually won't be protected by the standard bank insurers, the SIPC and the FDIC. After all, Robinhood is a startup, not a bank. If the product or the company don't pan out, customers may lose all their investments.
Ultimately, the thing that Robinhood is selling isn't all that original. As Bloomberg points out, it's basically a money market fund. Their strategy is basically conservative, but the hype — and the rush to market — is not.