The look of numbers showing a stock rising or falling or bursts of confetti matter because they can nudge users toward either long-term financial success or potentially problematic habits or speculative ideas, experts said. Financial professionals say those elements encourage people - many of them young and inexperienced - to celebrate day-trading and develop risky habits that will cost users money over time. The app has elements of fun, echoing in subtle ways the congratulatory elements of smartphone games that spur users to keep playing. Robinhood has said it’s democratizing America’s financial system because it doesn’t charge commissions to execute trades. Facebook and Instagram have been criticized for encouraging endless scrolling through social media feeds, while YouTube’s recommendations system that works to keep users watching has been blamed for pushing users toward videos of conspiracy theories and extremist rhetoric. The way that tech companies design their apps - most notably the tricks they employ to spur user engagement - is under more scrutiny than ever before. “I liken it to giving the keys of a sports car to a 12-year-old,” said Tara Falcone, a certified financial planner and the founder of ReisUP, a financial education company. Rather than directing users to adopt a coherent strategy, the app pushes riskier options like individual stocks and cryptocurrencies - and even offers trading on borrowed money, known as margin, and options trading, both of which are used by advanced investors but carry extreme risk. By comparison, Robinhood’s technicolor interface encourages users to buy and sell investments in a slick, smartphone-native environment.īut personal finance experts who spoke to NBC News said that the app’s success comes with some risk for consumers, particularly those new to investing. While most financial services companies now offer mobile apps, they tend to be smaller version of their sober websites, geared at keeping users informed and educated while also offering the chance to trade. Its promise of zero-commission stock trades has helped it grow to more than 6 million users and a valuation of more than $5 billion. Robinhood, started in 2013, is the most popular of a wave of apps to have emerged in recent years that try to reinvent the previously staid world of personal finance for the smartphone era.
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