Uncharted territory: Robinhoods competitors arent celebrating its massive outage

  • Robinhood experienced a massive outage that started Monday, with clients getting kept out of a huge market rally.
  • Customers of the trading app quickly lashed out on Twitter and one client has even filed a lawsuit in Florida.
  • But some of Robinhood’s international competitors were more sympathetic to the firm than its users.

Rivals to popular investing app Robinhood aren’t jumping at the opportunity to celebrate the company’s recent outage.

The U.S. commission-free trading platform experienced a massive outage that began on Monday, resulting in clients getting kept out of the market during a huge rally. The service faced downtime on Tuesday, too, before managing to restore its systems.

The $7.6 billion online brokerage firm blamed the technical problems on an “unprecedented load” on its infrastructure caused by volatile market conditions, record trading volume and a piling in of new users.

Users quickly lashed out on Twitter, and one client even went ahead with a lawsuit filed in Florida on Wednesday. Robinhood’s founders have since warned the service could face “additional brief outages” as its engineering team works to upgrade its systems.

CNBC spoke with some of the firm’s international competitors, who were more sympathetic to it than some of its users. Here’s what they had to say.

Freetrade is a U.K.-based financial technology, or fintech, start-up offering commission-free trades like Robinhood. Ian Fuller, the company’s chief technology officer, said he sympathized with the firm.

“They have a strong engineering team and have been a big disruptor to our industry for years,” Fuller, formerly an engineering manager for Snapchat, told CNBC. “When you innovate, the greater change means your risk is greater. It’s not trivial to run a brokerage platform smoothly.”

“We’ve worked to mitigate some of this risk by pushing our infrastructure to Google Cloud,” he added. But, citing technical challenges faced by Amazon’s S3 storage system in 2017, Fuller said “outages do happen.”

“When you run into issues like this, communication with your customers is key.”

For its part, Robinhood says it’s assessing customer queries about receiving compensation on a “case by case basis.” Compensation could take the form of “billing credits,” the company said.

Robinhood has ambitions to expand internationally, having launched a waiting list for U.K. customers last year. The firm doesn’t expect the outage to impact on its expansion plans and still plans on launching in early 2020.

Yoni Assia, CEO of social investment platform eToro, said “we should celebrate the growth of this industry, which is allowing more consumers to participate in the global financial markets.”

Assia’s trading platform, which began offering zero-fee trades and fractional shares last year, lets users buy and sell a range of assets from stocks to cryptocurrencies, like Robinhood. It has a few other distinctive features though, like the ability to copy another investor’s portfolio.

“There will be scalability challenges as the industry continues to grow and platforms open up the world of investing to a broader spectrum of consumers,” Assia said. “We see this in every industry: e-commerce platforms, social networks and now investment platforms.”

In recent months, traditional brokers including E-Trade and Charles Schwab have slashed their cut of trades to zero in order to remain competitive to platforms like Robinhood.

“Recent high market volatility combined with a large influx of new customers and increased volumes means the industry needs to be prepared for scale,” Assia said.

Source: https://www.cnbc.com/2020/03/06/what-robinhood-rivals-are-saying-about-trading-apps-massive-outage.html

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