Robinhood Gold and Coinbase One: The Trading Strategy

Hello and welcome to Protocol Fintech. This Monday: The Power of Commercial Subscriptions, Stripe’s Stablecoin Movement and Gary Gensler speaks at a conference in London.

out of the chain

By the time we ship this edition, I will be in Northern Virginia, where I grew up and where Protocol has an office. We’ll be releasing shorter newsletters this week as the team reunites to meet in person for the first time in, well, pretty much ever. We’ll always note any new reviews for the company, of course, and we’re happy to deliver a series of stories on a topic of keen fintech interest: subscriptions. It’s not just about processing card-on-file transactions – we’re looking at the potential of the subscription model to fuel fintech growth.

—Owen Thomas (E-mail | Twitter)

The subscription order

Newbie crypto and stock brokers like Coinbase and Robinhood face a dilemma: their earnings rise when the market rises, but fall in a falling or uncertain market. One way to solve this problem is to create features that consumers will pay a subscription for. While subscriptions aren’t new — monthly fees for online services date back decades — for consumer brokers, these products are still largely unproven.

There is one main example of how it works. Companies want to grow their subscriber count to increase loyalty the way, for example, Amazon Prime keeps customers coming back with perks, said Brian Graham, partner at Klaros Group. But a more important reason is to diversify their income.

  • “Whether in private markets or public markets, companies that have significant amounts of repeatable subscriptions are worth more,” Graham said. Wall Street has shown it will quickly punish companies with rising and falling revenues tied to volatile assets like bitcoin or meme stocks.
  • “Another thing that we actually didn’t talk about on the call, you’ve probably heard me talk about Robinhood Gold and the underwriting opportunity,” Robinhood CFO Jason Warnick said. during the company’s fourth quarter 2021 earnings call, touting the product’s potential on Wall Street

Coinbase and Robinhood products are primarily intended for active traders. For consumers, investment subscription offerings typically promise more comprehensive services that make trading easier, leave them more informed, or keep them more secure.

  • Coinbase One, which is still in beta trial, offers free crypto trading for subscribers at the current price of $29.99 per month. Additionally, it offers 24/7 phone support, additional tax assistance with pre-populated forms, and $1 million account takeover protection. Coinbase has pushed subscription services more broadly, including staking and custody, which provide “incremental stability to our revenue base as it grows,” the company said. mentioned.
  • Robinhood already offers free trades through its pay-for-order flow business model, which it applies to both stocks and crypto. But its Robinhood Gold subscription service, launched in 2016, still appeals to active traders who wish, for example, to trade on margin. Now priced at $5 per month, the a service allows users to have larger instant deposits; Morningstar Professional Research; top level market data from Nasdaq; and access to margin investing. Robinhood does not detail the number of Robinhood Gold subscribers.

No one seems to have identified a widespread subscription offer, although — the monetary equivalent of Netflix or Disney+.

  • “For people who don’t trade these kinds of assets frequently at all, it won’t make sense,” Graham said. “People who really negotiate all the time, it can make sense to have multiple [subscription accounts] because it will reduce their cost and not constrain them. »
  • Neobank Revolut offers tiered subscriptions, with two tiers in the US and three in the UK. Subscriptions offer benefits such as free international payments, no-fee or no-limit foreign exchange, higher interest rates on savings, and low-cost or free crypto transactions. . The highest tiers include Revolut’s Metal card.
  • Although Revolut’s subscription offers a crypto trading advantage, the service may appeal more to expats living abroad who make international payments or trade currencies, or people with large savings accounts.
  • This points to a direction in which these programs could be headed: Consumers are used to credit card-type perks, such as cash back and insurance. So bringing these types of benefits to a financial subscription service is likely to bring more consumers on board.

Businesses shouldn’t rely on subscriptions just to increase immediate revenue, said Melody Brue, principal analyst at Moor Insights & Strategy. “As a business model, subscription won’t necessarily be the revenue generator,” she said. “The loyalty, increased engagement, community, and more customer and behavioral data that comes from it will drive the long-term value of that customer.”

— Tomio Geron (E-mail | Twitter)

A version of this story first appeared on Protocol.com. Read it here.

A MESSAGE FROM CHECKOUT.COM

The emergence of DeFi is changing the way consumers think about how they store value. For reference, Visa recorded $2.5 billion in crypto transactions in the first quarter of 2022. We see consumers starting to really use it in a way that even a year ago was rather hypothetical.

Learn more

on the money

On protocol: Stripe has partnered with Twitter to start allowing creators to get paid in crypto. Payments will take place on the Polygon network, and creators will initially be paid in USDC, with plans to add support for other types of crypto in the future.

Silk Road’s Ross Ulbricht will not have to pay any compensation. The creator of the drug market on the dark web made a deal with the feds to clear its $183 million bill with a $3 billion stash of official bitcoins seized from the hacker who stole them from Silk Road. Getting Ulbricht to relinquish any ownership of bitcoin helped the government claim them.

Binance has reportedly recovered $5.8 million related to the Axie Infinity hack. CEO Changpeng Zhao mentioned some of the stolen coins were moved by hackers to more than 86 Binance accounts, from which the company recovered the funds.

Additionally, the US Treasury has sanctioned three other Ethereum addresses linked to the hack. The Office of Foreign Assets Control added three addresses to its list of Specially Designated Nationals, all of which were previously flagged as being linked to the Axie Infinity hack.

Ukraine’s central bank has banned the purchase of crypto with its national fiat currency. the additional measures on “cash-like transactions”, which include the purchase of virtual assets, were put in place to “prevent unproductive capital outflows”, the bank said. Individuals can still buy crypto with foreign currency at a cap of 100,000 hryvnia or $3,400 per month.

The Celsius Network warns customers that the CEL token could pose “regulatory risks”. The Crypto Lending Company update its “Risk Disclosure” page, adding “regulatory risks” to its list of risks the CEL rewards token may face.

Coming

City Week 2022 starts on Monday. the three day conference in London, SEC Chairman Gary Gensler, speaker on day two, as well as European Securities and Markets Authority Chair Verena Ross and Fidelity International CEO Dame Anne Richards.

Earnings calls from Visa and UBS are scheduled for Tuesday. vs. Estimated average EPS is at $1.65, down 9% from last quarter. UBS’ Estimated average EPS is at $0.51, up 34% from last quarter.

The Crypto and Digital Assets Summit begins on Tuesday. the two-day hybrid conference will be held in London and will feature speakers like Binance CEO Changpeng Zhao, Ethereum co-founder Charles Hoskinson and Ripple public policy officer Susan Friedman.

Earnings calls from PayPal and Fiserv are scheduled for Wednesday. PYPL Estimated average EPS is at $0.58, down 38% from last quarter. FISV Estimated average EPS is at $1.35, down 13% from last quarter.

Two U.S. House committee hearings are scheduled for Thursday. A hearing on FinCEN oversight take place at 10 a.m. ET, and a review of recent trends in mobile banking and payments take place at 2 p.m. ET.

Earnings calls from Mastercard and Robinhood are scheduled for Thursday. MY Estimated average EPS is at $2.17, down 8% from last quarter. HOOD’S Estimated average EPS is at -$0.31, up 37% from last quarter.

Technology regulation beyond Big Tech: Join Protocol’s Ben Brody and a panel of experts May 5 at 10 a.m. PT/1 p.m. ET to dive into the biggest regulatory priorities of not quite the biggest tech companies.

A MESSAGE FROM CHECKOUT.COM

Businesses – whether web2 or web3 oriented companies that don’t want to hold crypto but want to be able to interact with crypto holders – want to be able to offer this as a payment mechanism to their communities. The other is convenience, where merchants are comfortable accepting crypto.

Learn more

Thanks for reading – see you tomorrow!

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