October 4, 2024 • 13 mins
Robinhood Markets Chairman/Pres/CEO/Co-Founder Vlad Tenev discusses the company's United Kingdom offering. Tenev spoke with Bloomberg's Francine Lacqua.
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Episode Transcript
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Speaker 1 (00:00):
It's now roughly six months since Robinhood launched its UK offering. Well,
(00:03):
Bloomberg Intelligence says consensus sees the retail trading platforms revenue
jumping by forty percent this year, even as net interest
income tailwinds fade with US ratecaps. Well, I'm very pleased
to welcome Flat ten if robins Hood, Chief executive officer.
Flat So good to see you in London and so
good to see in the studio. You've been here for
a couple of weeks, so talk to me about what
you're offering to the UK. You've ruled it out about
(00:26):
six months ago. How's it going and what more do
you have planned?
Speaker 2 (00:29):
Yeah, thank you for having me. Always good to be
here in London. I think for the UK, the value
proposition is really Robinhood's the best way to invest in
US markets and US dollars. So we're offering trading and
investing in US stocks, and we have a particularly innovative
(00:49):
offering that we call twenty four hour Market, which allows
over one thousand symbols to be traded around the clock,
particularly useful here where there's less overlap with US East
Coast market hours.
Speaker 1 (01:02):
But so when you look at you know, at the
moment you allow consumers to invest in US stocks, are
you going to open that up put that to other
asset classes.
Speaker 3 (01:09):
Yeah.
Speaker 2 (01:10):
Absolutely, So the first priority is making all of the
great functionality that we became known for in the US
available to UK customers. So margin investing in particular is
coming in the coming weeks.
Speaker 3 (01:25):
There's been a huge demand for.
Speaker 2 (01:26):
Options as well, options on US equities because that's just
hard to come by here in the UK market, So
we really feel like we can differentiate with US offerings.
But of course we're looking ahead to multi currency wallet
support and local execution, including the London Stock Exchange.
Speaker 1 (01:46):
It's exciting. So in what kind of timeframe? I mean,
so margin in a couple of weeks, yeah, and then
every couple of every couple of months something something more.
Speaker 2 (01:55):
That's the idea, Yeah, every couple of months. I mean,
we have a long back law of things and we're
continuing to build new things. So we've talked a little
bit about new asset classes that are likely going to
come to the US first, like futures trading. But really
we think Robinhood can offer a differentiated service for UK
(02:17):
investors who want exposure to broader global markets.
Speaker 1 (02:21):
But we've been talking a lot about IPOs and the
fact that the IPO market in the UK and London
is a bit me It's like it's okay, but actually
doesn't really get people invested or excited about. Do you
see that translating into your platform, that the lens through
which people invest just needs a bit of a boost.
Speaker 2 (02:38):
Well, I think that one of the things that we
offer by being a US platform and giving access to
US stocks is that diversification. So even though even if
the UKIPO market or the UK markets have ups and downs,
the US markets are available for customers. So having more
(02:59):
opt and lower cost options that are easy to use,
I think is needed here and really is good for
the consumer.
Speaker 1 (03:07):
But is there more of an appetite towards think fixed
income products because of an appetite for risk? And do
you see that changing.
Speaker 2 (03:14):
Fixed income products are interesting? So with the retail audience,
we found that keeping it as simple as possible and
really meeting the customer's core need, which is in the
case of fixed income.
Speaker 3 (03:29):
Lower risk yield.
Speaker 2 (03:30):
And so we have a great product called cash Sweep
where we can allow our customers even when they're not
investing in equities to earn a yield on dollars on
the platform right now it's four and a half percent
with up to two and a half million dollars of
FDIC protection. So it's been a very popular product and
(03:54):
if you want to diversify into holding US dollars as
a UK customer, I think it's the best value proposition
on the market and very easy to use through Robinhood.
Speaker 1 (04:04):
Yeah, of course we don't give investment advice, but it's
a good page when you get some of the interest rates.
I mean, you've been able to hold on to a
lot of deposits because you offer high returns and some
of your competitors as interest rates go down, what does
that proposition look like?
Speaker 2 (04:19):
Yeah, it's interesting when no pun intended. When Robinhood first
went public in twenty twenty one, there was talk of
Robinhood being sort of like a zero interest rate business.
We'd done so well when rates were low because we
had brought so many people into the markets to start
investing in trading. The question was how would we do
(04:40):
if interest rates went up and kind of the tailwinds
for the markets decrease, because, as you know, interest rates
going up is kind of inversely correlated with stock market activity.
Speaker 3 (04:52):
But it took a lot of hard work.
Speaker 2 (04:54):
We had to essentially refound the business, mobilized towards retirement product,
toward high yield. We launched a credit card in the US,
and we built the business up to a point where
net interest income actually surpassed transaction volume as our leading
source of revenue. So our approach is we're going to
(05:15):
continue to roll out new products. Many of our products
actually will do better in a lower interest rate environment.
For example, margin which is coming in the UK, as
well as options trading. More of our active trading products
interest on cash becomes less attractive. But I think overall
the business and the value proposition for customers should benefit
(05:38):
even more from a lower interest rate environment.
Speaker 1 (05:41):
Talk to me a little bit about what happens after
the UK. Are there any more international phrase that you
want to get into.
Speaker 2 (05:47):
Yes, So we're live in the European Union as well
with our crypto offering, and we have a large crypto
business as well. And really the focus in these two
markets UK and EU is rounding out the prom suite.
So in the UK people want more active trading products.
There's some demand for cryptos well, and in the EU
(06:08):
customers want to invest in stocks, so we're going to
round those out, and of course, in parallel, we're looking
to expand to other markets. The long term vision is
every retail customer worldwide should have access to Robinhood and
should get the lowest cost and easiest to use access
to financial services possible through our platform.
Speaker 1 (06:30):
I mean, Europe's crypto regulation, you know, is kicking in
at the end of the year, So how does that
change some of your offerings or some of the products.
Speaker 2 (06:37):
That's one of the reasons we wanted to enter the
market because Europe does provide clear rules of the road.
They regulate things like initial coin offerings. Staking there's sort
of like clear paths to offering some of these crypto services.
And this is one area where Europe's actually in some
ways ahead of the US and regulation, and you know,
(06:59):
as an America and a European, I have mixed feelings
about this. They're sort of behind an AI somewhat ahead
in financial services. But that's one of the reasons why
we're excited about entering that market.
Speaker 1 (07:11):
Are there any countries in Europe where you're looking for
a full MICA license.
Speaker 3 (07:17):
We are looking to get that when it goes into effect.
Speaker 1 (07:19):
Yeah, where in all the countries where you're in at
the moment, or there are specific countries that you want
to target.
Speaker 2 (07:26):
We're licensed in Lithuania currently, but we might also get
specific licensure in different markets depending on depending on the
particular local laws and regulations.
Speaker 1 (07:38):
I have a million and one questions, but let's talk
a little bit about the US. You face competition from
Schwab Interactive Brokers on the retail brokerage space. How do
you see that evolving in the next twelve to eighteen months.
Speaker 2 (07:50):
Yeah, I think that if you look back at the
last three quarters we've reported, we've seen net inflows from
all of our major competitors. So customers have been bringing
assets to Robinhood from Schwab and from the others because
there's been consolidation. As you probably know, Schwab acquired tdam
(08:10):
ror Trade, which was a large active trader platform, Morgan
Stanley acquired e Trade, and so a lot of these
customers are being forced migrated to unknown platforms and that
forces them to kind of take a look at what
else is out there, and a lot of them see Robinhood.
They see the compelling pricing the user experience, and this
has been sort of like an extra nudge for them
(08:33):
to move their assets over and we've been doubling down
on that, adding more products, more account types in the US.
We have our first Active Trader event where I'm going
to announce some new exciting products. That's in a couple
of weeks in Miami, and so we've really been accelerating
and trying to make it even easier and more compelling
for customers to move all of their investment activities to US.
Speaker 1 (08:56):
I mean, is there a dangerous Can you give us
a little bit of an idea of what the NAT
will be and is there a danger that you're going
broad maybe too quickly or is that really the aim
because you want to get a little bit of market share,
Like do you have an ideal customer in mind?
Speaker 2 (09:11):
Well, we have several types of customers, but the kind
of core of our business is the active trader, and
the number one priority that we have as a business
is to actually be the leader in the active trader market.
If you look through twenty twenty three, we grew our
market share and options by just under twenty percent, Equities
(09:32):
grew by fourteen percent, so we're on a path to that,
and certainly there's ways to accelerate, Like we're great on mobile,
but our web product has some room for improvement. Up
until recently, we weren't that competitive on margin, but now
we have the leading rates in the industry. So there
is a focus on active traders, but we don't want
(09:54):
to just be an active trader business. We see much
more potential for U serving the mass market for that,
and so we built compelling retirement products which we hope
to bring to the UK soon as well, the cash
yield product, the credit card. I think that the more
breadth of products we offer, the more compelling it is
(10:16):
for a customer to bring their entire financial life into Robinhood.
Speaker 1 (10:20):
In the UK, is Revolute your biggest competitor.
Speaker 3 (10:24):
I think there's a number of small startups.
Speaker 2 (10:30):
But I think the interesting thing about the UK is,
unlike the US, there hasn't really been a zero commission revolution.
You know, if you're a customer of one of the
big brokers like Hard Greaves, you're still paying you know,
ten pounds of trade. And I think the incumbents here
still have the majority of the market share, so you know,
(10:54):
there are some FinTechs that have launched compelling products, but
the mark itself hasn't transformed in the way that robin
Hood has transformed the market in the US, and since
we launched in the US, individual household investment in equities
has gone up something like twenty seven percent in that
time period. In the UK it's been basically flat. So
(11:17):
we're hoping to change that.
Speaker 3 (11:18):
Here.
Speaker 1 (11:19):
Talk to me a little bit about your other venture, Harmonic.
How does that fit in? I mean, you raise money
with it. How does that fit into the robin Hood's ecosystem.
Speaker 3 (11:27):
Completely separate companies, so it.
Speaker 1 (11:30):
Doesn't feed in at all.
Speaker 3 (11:32):
No.
Speaker 2 (11:32):
Harmonic is an AI business. We're building what we call
mathematical superintelligence, and the idea is that the current large
language models that are out there are particularly good at
writing history essays, but we see gaps in their ability
to produce verified output that is trusted. They hallucinate, they
(11:55):
confidently state wrong things, and we want to solve this
with mathematics by kind of imbuing mathematics as a primitive.
And the side effect is the models that we build
could then be used to solve really high stakes quantitative
problems where accuracy is actually very critical. I mean, and
(12:16):
that could be applied to financial services.
Speaker 1 (12:17):
I was going to ask, the application could actually be
in super algorithms.
Speaker 2 (12:22):
Yeah, right, financial services is obviously a big application of that,
but so is aerospace, automotive, you know, anything where the
consequences of writing software with bugs and fundamental errors can
be grave. So yeah, I think the current models in
(12:44):
AI don't adequately solve this problem, and there's like a
convergence of forces that make now the right time to
kind of build this technology.
Speaker 1 (12:54):
But thank you so much for joining us today. We
went around the world looking at all of the things
that you're trying to solve. Latentive. They're the chief executive
of Robin Hood
It's now roughly six months since Robinhood launched its UK offering. Well,
(00:03):
Bloomberg Intelligence says consensus sees the retail trading platforms revenue
jumping by forty percent this year, even as net interest
income tailwinds fade with US ratecaps. Well, I'm very pleased
to welcome Flat ten if robins Hood, Chief executive officer.
Flat So good to see you in London and so
good to see in the studio. You've been here for
a couple of weeks, so talk to me about what
you're offering to the UK. You've ruled it out about
(00:26):
six months ago. How's it going and what more do
you have planned?
Speaker 2 (00:29):
Yeah, thank you for having me. Always good to be
here in London. I think for the UK, the value
proposition is really Robinhood's the best way to invest in
US markets and US dollars. So we're offering trading and
investing in US stocks, and we have a particularly innovative
(00:49):
offering that we call twenty four hour Market, which allows
over one thousand symbols to be traded around the clock,
particularly useful here where there's less overlap with US East
Coast market hours.
Speaker 1 (01:02):
But so when you look at you know, at the
moment you allow consumers to invest in US stocks, are
you going to open that up put that to other
asset classes.
Speaker 3 (01:09):
Yeah.
Speaker 2 (01:10):
Absolutely, So the first priority is making all of the
great functionality that we became known for in the US
available to UK customers. So margin investing in particular is
coming in the coming weeks.
Speaker 3 (01:25):
There's been a huge demand for.
Speaker 2 (01:26):
Options as well, options on US equities because that's just
hard to come by here in the UK market, So
we really feel like we can differentiate with US offerings.
But of course we're looking ahead to multi currency wallet
support and local execution, including the London Stock Exchange.
Speaker 1 (01:46):
It's exciting. So in what kind of timeframe? I mean,
so margin in a couple of weeks, yeah, and then
every couple of every couple of months something something more.
Speaker 2 (01:55):
That's the idea, Yeah, every couple of months. I mean,
we have a long back law of things and we're
continuing to build new things. So we've talked a little
bit about new asset classes that are likely going to
come to the US first, like futures trading. But really
we think Robinhood can offer a differentiated service for UK
(02:17):
investors who want exposure to broader global markets.
Speaker 1 (02:21):
But we've been talking a lot about IPOs and the
fact that the IPO market in the UK and London
is a bit me It's like it's okay, but actually
doesn't really get people invested or excited about. Do you
see that translating into your platform, that the lens through
which people invest just needs a bit of a boost.
Speaker 2 (02:38):
Well, I think that one of the things that we
offer by being a US platform and giving access to
US stocks is that diversification. So even though even if
the UKIPO market or the UK markets have ups and downs,
the US markets are available for customers. So having more
(02:59):
opt and lower cost options that are easy to use,
I think is needed here and really is good for
the consumer.
Speaker 1 (03:07):
But is there more of an appetite towards think fixed
income products because of an appetite for risk? And do
you see that changing.
Speaker 2 (03:14):
Fixed income products are interesting? So with the retail audience,
we found that keeping it as simple as possible and
really meeting the customer's core need, which is in the
case of fixed income.
Speaker 3 (03:29):
Lower risk yield.
Speaker 2 (03:30):
And so we have a great product called cash Sweep
where we can allow our customers even when they're not
investing in equities to earn a yield on dollars on
the platform right now it's four and a half percent
with up to two and a half million dollars of
FDIC protection. So it's been a very popular product and
(03:54):
if you want to diversify into holding US dollars as
a UK customer, I think it's the best value proposition
on the market and very easy to use through Robinhood.
Speaker 1 (04:04):
Yeah, of course we don't give investment advice, but it's
a good page when you get some of the interest rates.
I mean, you've been able to hold on to a
lot of deposits because you offer high returns and some
of your competitors as interest rates go down, what does
that proposition look like?
Speaker 2 (04:19):
Yeah, it's interesting when no pun intended. When Robinhood first
went public in twenty twenty one, there was talk of
Robinhood being sort of like a zero interest rate business.
We'd done so well when rates were low because we
had brought so many people into the markets to start
investing in trading. The question was how would we do
(04:40):
if interest rates went up and kind of the tailwinds
for the markets decrease, because, as you know, interest rates
going up is kind of inversely correlated with stock market activity.
Speaker 3 (04:52):
But it took a lot of hard work.
Speaker 2 (04:54):
We had to essentially refound the business, mobilized towards retirement product,
toward high yield. We launched a credit card in the US,
and we built the business up to a point where
net interest income actually surpassed transaction volume as our leading
source of revenue. So our approach is we're going to
(05:15):
continue to roll out new products. Many of our products
actually will do better in a lower interest rate environment.
For example, margin which is coming in the UK, as
well as options trading. More of our active trading products
interest on cash becomes less attractive. But I think overall
the business and the value proposition for customers should benefit
(05:38):
even more from a lower interest rate environment.
Speaker 1 (05:41):
Talk to me a little bit about what happens after
the UK. Are there any more international phrase that you
want to get into.
Speaker 2 (05:47):
Yes, So we're live in the European Union as well
with our crypto offering, and we have a large crypto
business as well. And really the focus in these two
markets UK and EU is rounding out the prom suite.
So in the UK people want more active trading products.
There's some demand for cryptos well, and in the EU
(06:08):
customers want to invest in stocks, so we're going to
round those out, and of course, in parallel, we're looking
to expand to other markets. The long term vision is
every retail customer worldwide should have access to Robinhood and
should get the lowest cost and easiest to use access
to financial services possible through our platform.
Speaker 1 (06:30):
I mean, Europe's crypto regulation, you know, is kicking in
at the end of the year, So how does that
change some of your offerings or some of the products.
Speaker 2 (06:37):
That's one of the reasons we wanted to enter the
market because Europe does provide clear rules of the road.
They regulate things like initial coin offerings. Staking there's sort
of like clear paths to offering some of these crypto services.
And this is one area where Europe's actually in some
ways ahead of the US and regulation, and you know,
(06:59):
as an America and a European, I have mixed feelings
about this. They're sort of behind an AI somewhat ahead
in financial services. But that's one of the reasons why
we're excited about entering that market.
Speaker 1 (07:11):
Are there any countries in Europe where you're looking for
a full MICA license.
Speaker 3 (07:17):
We are looking to get that when it goes into effect.
Speaker 1 (07:19):
Yeah, where in all the countries where you're in at
the moment, or there are specific countries that you want
to target.
Speaker 2 (07:26):
We're licensed in Lithuania currently, but we might also get
specific licensure in different markets depending on depending on the
particular local laws and regulations.
Speaker 1 (07:38):
I have a million and one questions, but let's talk
a little bit about the US. You face competition from
Schwab Interactive Brokers on the retail brokerage space. How do
you see that evolving in the next twelve to eighteen months.
Speaker 2 (07:50):
Yeah, I think that if you look back at the
last three quarters we've reported, we've seen net inflows from
all of our major competitors. So customers have been bringing
assets to Robinhood from Schwab and from the others because
there's been consolidation. As you probably know, Schwab acquired tdam
(08:10):
ror Trade, which was a large active trader platform, Morgan
Stanley acquired e Trade, and so a lot of these
customers are being forced migrated to unknown platforms and that
forces them to kind of take a look at what
else is out there, and a lot of them see Robinhood.
They see the compelling pricing the user experience, and this
has been sort of like an extra nudge for them
(08:33):
to move their assets over and we've been doubling down
on that, adding more products, more account types in the US.
We have our first Active Trader event where I'm going
to announce some new exciting products. That's in a couple
of weeks in Miami, and so we've really been accelerating
and trying to make it even easier and more compelling
for customers to move all of their investment activities to US.
Speaker 1 (08:56):
I mean, is there a dangerous Can you give us
a little bit of an idea of what the NAT
will be and is there a danger that you're going
broad maybe too quickly or is that really the aim
because you want to get a little bit of market share,
Like do you have an ideal customer in mind?
Speaker 2 (09:11):
Well, we have several types of customers, but the kind
of core of our business is the active trader, and
the number one priority that we have as a business
is to actually be the leader in the active trader market.
If you look through twenty twenty three, we grew our
market share and options by just under twenty percent, Equities
(09:32):
grew by fourteen percent, so we're on a path to that,
and certainly there's ways to accelerate, Like we're great on mobile,
but our web product has some room for improvement. Up
until recently, we weren't that competitive on margin, but now
we have the leading rates in the industry. So there
is a focus on active traders, but we don't want
(09:54):
to just be an active trader business. We see much
more potential for U serving the mass market for that,
and so we built compelling retirement products which we hope
to bring to the UK soon as well, the cash
yield product, the credit card. I think that the more
breadth of products we offer, the more compelling it is
(10:16):
for a customer to bring their entire financial life into Robinhood.
Speaker 1 (10:20):
In the UK, is Revolute your biggest competitor.
Speaker 3 (10:24):
I think there's a number of small startups.
Speaker 2 (10:30):
But I think the interesting thing about the UK is,
unlike the US, there hasn't really been a zero commission revolution.
You know, if you're a customer of one of the
big brokers like Hard Greaves, you're still paying you know,
ten pounds of trade. And I think the incumbents here
still have the majority of the market share, so you know,
(10:54):
there are some FinTechs that have launched compelling products, but
the mark itself hasn't transformed in the way that robin
Hood has transformed the market in the US, and since
we launched in the US, individual household investment in equities
has gone up something like twenty seven percent in that
time period. In the UK it's been basically flat. So
(11:17):
we're hoping to change that.
Speaker 3 (11:18):
Here.
Speaker 1 (11:19):
Talk to me a little bit about your other venture, Harmonic.
How does that fit in? I mean, you raise money
with it. How does that fit into the robin Hood's ecosystem.
Speaker 3 (11:27):
Completely separate companies, so it.
Speaker 1 (11:30):
Doesn't feed in at all.
Speaker 3 (11:32):
No.
Speaker 2 (11:32):
Harmonic is an AI business. We're building what we call
mathematical superintelligence, and the idea is that the current large
language models that are out there are particularly good at
writing history essays, but we see gaps in their ability
to produce verified output that is trusted. They hallucinate, they
(11:55):
confidently state wrong things, and we want to solve this
with mathematics by kind of imbuing mathematics as a primitive.
And the side effect is the models that we build
could then be used to solve really high stakes quantitative
problems where accuracy is actually very critical. I mean, and
(12:16):
that could be applied to financial services.
Speaker 1 (12:17):
I was going to ask, the application could actually be
in super algorithms.
Speaker 2 (12:22):
Yeah, right, financial services is obviously a big application of that,
but so is aerospace, automotive, you know, anything where the
consequences of writing software with bugs and fundamental errors can
be grave. So yeah, I think the current models in
(12:44):
AI don't adequately solve this problem, and there's like a
convergence of forces that make now the right time to
kind of build this technology.
Speaker 1 (12:54):
But thank you so much for joining us today. We
went around the world looking at all of the things
that you're trying to solve. Latentive. They're the chief executive
of Robin Hood
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