Christopher Haruna Hamman is a Freelance content developer, Crypto-Enthusiast and tech-savvy individual. He is also a Superstar Content Developer, Strategy Demigod, and Standup Guy.
Last week major stock and cryptocurrency trading app Robinhood experienced a major outage. On March 9, it went offline again.
This puts the commission-free trading app in a position where losses are mounting. Already various social media show that some users are migrating to other platforms.
— Vince (@TradingVlog) March 9, 2020
This is already the second time that the app is going down this month. The Robinhood app was offline on March 2nd. All services though had been restored by afternoon yesterday.
Robinhood is one of those apps that started a price war with the bigger legacy financial apps. Commission-free trading generates mass appeal among many. Financial services just got cheaper. They also present a use-case scenario where mass appeal determines popularity.
When the mass appeal reverses, things can go bad quickly. Already, many users of the app had missed out on recent market movements. March 2nd was the biggest day in price increases for the Dow Jones.
The Dow’s biggest gains in history occurred on that day. Robinhood’s users missed out. Some have already filed a lawsuit. Sources say that the March 4 lawsuit was filed by user Travis Taaffe. He alleges that users were unable to transfer money. He also accused the startup that they didn’t “provide a functioning platform,”.
Robinhood has also been considered to be responsible for the “brokerage wars”. Former Bon Broker Jesse Eberle has indicated that Robinhood will eventually lose. From its introduction of the fee-free trading model in 2014, the firm is sliding. Erbele has reportedly indicated that Robinhood will lose out. He said:
“They may have started the brokerage war with commission-free trading, but I would bet they now end up on the losing side of this battle as people, myself included, will move to more established and reliable platforms. Don’t be surprised if you see a lawsuit or two being lobbed your way as well, Robinhood!”
Robinhood has reportedly been recently valued at $7.6 billion. Many users are thrilled about no-fee trading. But the startup has gone offline twice in the recent time. This points to issues that may be beyond the management’s control.
This is also a general problem with fintech startups. Most fintech startups are dependent on other startups who offer mission-critical services. Technical hitches sometimes aren’t the fault of the startup per se. Dependent services can also cause problems. The case of Chime is one such example. Alternative bank Chime went offline in the U.S. last year for days. The fault was traced to Galileo Financial Technologies, a payments processor. Chime went on to raise about $500 million in series E funding late last year.
If Robinhood will be able to pull this off remains unclear. One thing is certain: bad services drive customers away.