The Future of Stock Trading: Building Apps like Robinhood
Gone are the days when investors had to call the stockbrokers to buy stocks in exchange for a commission. Nowadays, you can buy and sell stock effortlessly through your mobile. The inception and growth of mobile trading apps have made trading and investing accessible and convenient for the general public, especially by eliminating the need for a middleman and preferring to buy and sell stocks through apps. Additionally, the rise of smartphone usage has made it easier for people to oversee their investments. These developments have spurred the growth of apps like Robinhood.
Industry heavyweights like the Robinhood app mainly lead this transformation. Its user-friendly interface, easy accessibility, zero commissions, and no markups or markdowns – have made Robinhood the most popular stock trading app. Significantly, the global online trading platform market size is projected to grow from $9.94 Billion in 2023 to $15.34 Billion by 2030. These figures indicate promising growth for the trading and investment app market.
If you are an entrepreneur and want to build an app like Robinhood, but your mind is riddled with doubts, then read this article because it thoroughly explains how you can build apps like Robinhood. Read the article to learn more.
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Why Robinhood app is popular?
If you are interested in building or investing in apps like Robinhood, then you should explore the reasons for its popularity.
Robinhood’s popularity depends on numerous factors and strategies. Firstly, the app facilitates people, makes it easy to engage in stock trading, and exterminates the need for a brokerage firm. Users can directly buy and sell stocks from their phones without zero commissions or other fees.
Secondly, trading apps like Robinhood are available to anyone at least 18 years old and a United States resident. The app primarily targets amateur investors and youth who might only invest a little but will start investing as a hobby. The app also targets professional investors who proactively buy and sell stocks. Users can download the app from Apple Store or Google Play Store and follow instructions to run the app.
Thirdly, the Robinhood app’s stock trading model is embedded in convenience, accessibility, and a user-friendly interface. Due to these features, users find it immensely easier to invest in stocks through the Robinhood app.
Key features of the Robinhood app
Robinhood app boasts innovative features that have contributed to its success. Entrepreneurs and app developers can take cues from these features and incorporate them into their apps like Robinhood. The following are the explanations of key features of the Robinhood app:
Robinhood app features a user-friendly and intuitive interface that is easy to navigate. It provides a clean and minimalist design, making it simple for learners and experienced investors to access and use the app.
Robinhood android app is at the forefront of commission-free trading in the industry. It authorizes users to buy and sell stocks, ETFs, options, and cryptocurrencies without paying any transaction fees, making it cost-effective for investors.
Robinhood is chiefly a mobile app available for both iOS and Android devices. The app is enhanced for mobile usage, allowing users to conveniently trade and access their portfolios.
Robinhood Android app also offers fractional share investing, enabling users to buy and sell fractional portions of shares. This feature allows investors to purchase stocks with high share prices by investing smaller amounts of money, making it more accessible to a broader audience.
In order to create apps like Robinhood, you should know that Robinhood offers a subscription facility called Robinhood Gold, which provides additional features for a monthly fee. These features include extended trading hours, access to professional research, and the ability to trade on margin (borrowing money to invest).
Robinhood app offers a cash management feature called Robinhood Cash Management. It provides users with a Robinhood debit card. It offers features such as direct deposit, access to A.T.M.s, and the ability to earn interest on reserved cash in their brokerage account.
Real-time market data
Investment apps like Robinhood provide real-time market data, including stock quotes, charts, and essential research tools. Users can stay updated with the latest market information to make sound investment decisions.
Robinhood offers educational resources to help users learn about investing and trading. It provides articles, tutorials, and educational content within the app to advance users’ knowledge.
Watchlists and alerts
Users can create watchlists to track their favorite stocks and receive alerts on price changes, news updates, and other relevant information. These features help users stay informed about their investments.
Stock trading apps like Robinhood takes stringent measures to ensure account protection. The app safeguards the security of user accounts and personal information by implementing measures such as two-factor authentication and encryption.
The Development Process for Apps Like Robinhood
Developing an app like Robinhood involves a multi-stage process, from inception to deployment. The following is an explanation of each key stage of the development process.
At the start of the development process, it’s vital to understand the fundamental concept of a stock trading and investment app similar to the Robinhood Android app. Identify your target audience, which may include learners or experienced investors. Conduct market research to evaluate your app’s competitors, industry trends, and unique selling propositions (U.S.P.). This research will help you interpret your app’s unique features and functionalities, such as real-time stock trading, investment tracking, news and market updates, account management, and more.
Planning and design
In the next stage, you need a create a comprehensive project plan that includes timelines, milestones, and resource allocation. Design the app’s user experience (UX) and user interface (U.I.) to ensure a seamless and visually attractive design. It includes mapping the app’s structure, navigation flow, and interactions through wireframes or prototypes. Determine key design elements, such as color schemes, typography, and branding guidelines, to ensure your app’s consistent and appealing visual identity.
Establish the server infrastructure and select the appropriate technology stack based on your requirements. Popular choices include Node.js, Ruby on Rails, Django, or other frameworks. Create the backend logic for user authentication, data storage, and integration with external services. Implement secure protocols and encryption techniques to protect sensitive user information. Integrate with third-party APIs to fetch real-time market data, such as stock prices, financial information, and news updates. Implement features like order execution, trade settlement, and portfolio management to facilitate seamless user interactions.
Select a suitable frontend framework or library, such as React, Angular, or Vue.js, based on your team’s expertise and project requirements. Translate the UI/UX designs into responsive and interactive frontend components. Develop user registration, login, account verification, and profile management screens. Implement intuitive user interfaces for stock search, charting, trading, and portfolio tracking. Ensure a seamless user experience across various devices and screen sizes, considering factors like responsiveness, performance, and accessibility.
Real-time data integration
In order to create an app like Robinhood, you need to integrate with stock market data providers, such as exchanges or financial data providers, to fetch real-time market data. Implement data streaming and update mechanisms to keep the app synchronized with the latest stock prices, charts, and financial information. Develop algorithms and data processing techniques for data analysis, pattern recognition, and technical indicators. Apply real-time notifications and alerts to inform users about price changes, order executions, and account updates.
Trading and portfolio management
You must apply essential trading functionalities that allow users to place buy and sell orders, set limit and stop orders, and validate orders correctly. Create features for tracking and managing user portfolios, including holdings, transaction history, and performance metrics. Provide users with tools and analytics to analyze their investment performance, risk tolerance, and diversification strategies. Implement features like fractional share trading, dividend reinvestment, and tax reporting to enhance user experience and meet investment needs.
Security and Compliance
Implement tough security measures to protect user data, such as encryption, secure authentication, and authorization mechanisms. Fulfill financial regulations to ensure legal compliance, including Know Your Customer (KYC) and Anti-Money Laundering (A.M.L.) requirements. Implement multi-factor authentication, biometric authentication, or two-step verification for enhanced security. Conduct consistent security audits and vulnerability assessments to determine and eliminate potential risks.
Testing and Quality Assurance
Finally, you must perform comprehensive testing to ensure the app functions smoothly and delivers a seamless user experience. It includes functional testing to verify each feature and usability testing to evaluate the app.
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How does the Robinhood app make money?
Robinhood app mainly generates revenue through several vital sources. Although Robinhood’s principal trading services are commission-free, the app still generates revenue through the methods mentioned below. Apps like Robinhood may want to employ all or a few of these monetization strategies.
Payment for Order Flow (PFOF)
Robinhood directs customer trades to market makers or high-frequency trading (H.F.T.) firms, which fulfill the transactions on behalf of Robinhood users. These market makers pay Robinhood for the order flow, and market makers profit by capturing the spread between the bid and ask prices when executing the trades. Although PFOF has been a significant revenue source for Robinhood, it has become a matter of concern regarding potential conflicts of interest and the best execution of customer trades.
It is Robinhood’s premium subscription service. Robinhood earns revenue from the subscription fees collected from Robinhood Gold users. For a monthly fee, users can access advanced features like extended trading hours, additional buying power (margin trading), and the ability to borrow money from Robinhood.
Charing interest on cash balances
Robinhood also charges interest on the money users have deposited into their accounts until they invest it. By sweeping the uninvested funds into program banks, which offer interest on the cash, Robinhood keeps a portion of the interest earned while passing on the rest to the account holders.
Charging interest on the borrowed amount
Robinhood also allows users to borrow money to invest in the stock market. Users pay interest on the borrowed amount, and Robinhood earns revenue from the interest charged on these margin loans.
Robinhood also benefits from securities lending programs, which lend out stocks held by its customers to other financial institutions or short sellers. In exchange, Robinhood receives a fee for providing the shares, a source of additional revenue.
Sponsored content and advertising
You can also partner with financial institutions or companies to display sponsored content or targeted advertisements within your app like Robinhood. Ensure that the ads are relevant to the users’ economic interests to maintain user engagement.
How much does it cost to develop apps like Robinhood?
The development cost for apps like Robinhood will depend on numerous factors. The development cost can considerably vary depending on the specific requirements, functionalities, and technologies used for the app. Moreover, the platform type (e.g., iOS, Android, web) and the development cost can also significantly impact that cost. The development cost will likely be much higher if your development team is based in the U.S. or Western Europe. Conversely, if you plan to hire a development team from Asia or Latin America, they will likely cost you much less. A rough estimate suggests that the development cost for a trading app like Robinhood can range from $50,000 to $500,000 or more. However, it’s important to note that this estimate can change significantly depending on the factors mentioned earlier.
Who are the main competitors of the Robinhood app?
Some of the main competitors of the Robinhood app, known for commission-free investing and trading, include E*TRADE, T.D. Ameritrade, Fidelity Investments, Charles Schwab, and Webull. These platforms offer similar features, including a wide range of investment options, user-friendly interfaces, and educational resources, making them popular alternatives for investors and traders.
What technologies are commonly used to develop apps like Robinhood?
Developing an app like Robinhood involves technologies like React Native or Flutter for cross-platform development, backend technologies like Node.js or Python, and databases like PostgreSQL or MongoDB.
How can I ensure the security of user data and transactions?
Security is crucial for any financial app. Implement robust encryption techniques, secure communication protocols (HTTPS), two-factor authentication, and compliance with industry standards like PCI DSS.
Do I need to obtain licenses or permissions to operate such an app?
Yes, you will likely need to obtain licenses and comply with regulations related to financial services and investing in the jurisdictions where you operate. Consult legal experts to ensure compliance.
Is it necessary to hire a development team, or can I build the app myself? The complexity of developing an app like Robinhood requires a skilled development team, including frontend and backend developers, UI/UX designers, and quality assurance professionals.
Gohar is a seasoned IT writer specializing in leading technologies. He holds a Diploma and Bachelor's degree from the University of London, with professional experience spanning over five years in the IT sector. His expertise involves a keen focus on mobile applications, web apps, blockchain, content management systems, e-commerce, and fintech. Beyond the professional field, Gohar is an avid reader and reads extensively about emerging and innovative technologies.