The digital brokerage firm, Robinhood, decided to withdraw its charter bank application on Wednesday, November 27th.
The application was submitted earlier this year to the Office of the Comptroller of the Currency (OCC); the withdrawal was made voluntarily according to a Robinhood spokesperson. Moreover, a source said that this decision doesn’t imply a change with the company’s goal.
Stock-trading startup, Robinhood, is based in Menlo Park, California. Using the latest advances in technology, the company allows individuals to invest in public companies and stocks without paying a commission. They also offer cryptocurrency trading and plan to sell banking products, hence their recent bank charter application.
Robinhood entered the fintech scene in 2013. Since then, major incumbents, such as Fidelity and Charles Schwab, maintained zero commissions.
Now, with the recent bank charter withdrawal, they showed the challenges that come with upending the financial system. Nevertheless, they appreciated the collaboration and efforts of all parties that were involved in the entire process.
The Robinhood spokesperson clarified that the company will continue to increase its financial activities and challenge the industry to improve its services. In addition, there will be no changes to Robinhood’s product plans.
The firm recently launched a cash management account; a day later, they announced the plans for re-launching and renaming the product. Despite the application withdrawal, fintech companies can proceed with offering banking products without undergoing regulatory scrutiny. One popular option is to team up with FDIC-insured banks. These banks will hold the customers’ deposits as fintechs take care of the app and the customer experience.
Perhaps another reason why Robinhood backed out from the application is due to the lengthy process of becoming a federally insured bank. Fintechs thought they could have a quick, clear path to becoming a bank. That notion was shut down back in October as New York’s federal district court declared that OCC alone has no authority to issue bank charters.