Late last year, Robinhood attempted to launch a disruptive, first-of-its-kind checking/savings product, one which offered consumers a 3% interest rate with zero fees. Just days later, however, the company had to backtrack on its new product. The problem arose from the fact that Robinhood accounts are insured by Securities Investor Protection Corporation (SIPC), which operate under different rules and requirements than the typical U.S. Federal Deposit Insurance Corporation (FDIC)-insured accounts. Essentially, SIPC only covers funds that are meant for investment purposes, meaning that other funds (i.e. in a check/savings account product) would be unprotected.
Robinhood took immediate action, announcing that it would amend their original plan and would re-brand and re-name the product. The company has also learned to be less impetuous in future. If the company had simply reached out to SIPC first, they would have been learned of the issue and avoided any public embarrassment; instead, they ended up with an epic fail. The company is still planning on moving forward with a similar product (one that offers the benefits of an investment account and a checking/savings account); however, they will no doubt look before they leap next time.