Robinhood deepens ties with JPMorgan by utilizing financial institution for cash transfers forward of anticipated IPO

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Avishek Das | LightRocket | Getty Photos

Robinhood, the free-trading app that helped drive a surge in retail investing through the pandemic, has switched to utilizing JPMorgan Chase to deal with essential cash transfers into prospects’ accounts.

The beginning-up emailed prospects this week to say that it’s now utilizing JPMorgan, the most important U.S. financial institution by property, to course of transactions for money administration accounts. It had beforehand used Ohio-based Sutton Financial institution, a neighborhood lender with 8 branches.

“This alteration is an element of a bigger effort to make a extra constant and dependable expertise, and it’ll improve our means to fulfill your money administration wants,” Robinhood mentioned within the electronic mail.

The transfer illustrates the methods through which conventional banks are each a competitor with and an enabler of the brand new guard of fintech gamers like Robinhood, which has shortly amassed greater than 13 million customers drawn to free trades and a slick interface. JPMorgan CEO Jamie Dimon has repeatedly warned shareholders that fintech and Massive Tech gamers are encroaching on his trade’s territory.

“Many of those new opponents have achieved a terrific job in easing prospects’ ache factors and making digital platforms very simple to make use of,” Dimon mentioned this month in his annual investor letter. “From loans to cost methods to investing, they’ve achieved an amazing job.”

Whereas JPMorgan is blissful to supply monetary plumbing-type providers to Robinhood – and is pushing to supply it extra providers within the funds realm – the financial institution additionally competes with the upstart.

On-line brokerages throughout the trade in the end adopted Robinhood’s no-commission stance, and JPMorgan gives free limitless trades through its personal cellular app. Robinhood and JPMorgan declined to remark for this story.

JPMorgan’s wholesale funds enterprise, run by Takis Georgakopoulos, received the Robinhood enterprise final yr and not too long ago begun taking on accounts, based on an individual with information of the matter. Final yr, his enterprise also took on Coinbase and Gemini, two main bitcoin exchanges, as payments-processing purchasers.

The funds deal is a part of an internet of connections between Robinhood and conventional lenders. Robinhood depends on banks together with JPMorgan, Goldman Sachs and Morgan Stanley for enormous commercial credit traces to fund company actions.

The newest growth comes as funding banks together with JPMorgan jockey for profitable roles within the upcoming Robinhood preliminary public providing. Final month, Robinhood mentioned it had filed confidentially with the Securities and Alternate Fee for an IPO that would come as quickly as late within the second quarter.

Whereas Robinhood’s final fundraising pegged its valuation at $11.7 billion, buying and selling of personal shares indicated it may very well be valued as a lot as $40 billion in an IPO, based on a Bloomberg analyst.

The retail investing growth that Robinhood helped usher in, mixed with trillions of {dollars} in authorities stimulus, has resulted in a surge in new prospects and buying and selling quantity for brokerages this yr.  

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