Product Overview

Serena Khan, a fictional analyst at an investment management firm, was tasked with evaluating a potential investment in Robinhood Markets, Inc. in March 2023. Known for its sleek interface and zero-commission trades, Robinhood aimed to “democratize finance” by making investment products widely accessible. The company saw a surge in users during the COVID-19 pandemic but came under fire for its role in the meme-stock craze and its revenue model based on payment for order flow. Robinhood had struggled since its 2021 IPO as the number of active users declined and shares fell over 80% from their highs. This case encourages students to explore key themes relevant to a broad range of fintech companies and provides an opportunity to discuss the role of wholesale market makers in trade execution, the economics of PFOF, and the gamification of investing.

Learning Objectives

- Identify factors that contributed to the growth of a fintech company - Illustrate the regulatory challenges associated with a novel business model intended to expand access to financial services - Assess the competitive responses to a fintech company’s market entry - Evaluate the growth strategy of a fintech company and the rebundling of financial services