PayPal Is Working on a Stock Trading Platform That Might Compete With Robinhood

Divya  |  Aug 31, 2021

After launching cryptocurrency trading last year, PayPal is looking to disrupt the retail stock trading market -- dominated by Robinhood -- through a new platform. According to a CNBC report from August 30, the California-based payments company has hired a brokerage industry vet as part of its efforts.

PayPal Is Exploring a Stock Trading Platform That May Take on Robinhood

PayPal has named brokerage industry expert Rich Hagen as the CEO of its previously undisclosed division called Invest. When CNBC reached out to the company for a comment, it redirected the outlet to CEO Dan Schulman’s comments from February, when he said the company may include “investment capabilities” in its financial services over the long term.

The latest development indicates that more companies want a share of the retail trading market, which overturned the fortunes of AMC and Gamestop shares in meme rallies. Robinhood has undoubtedly been the biggest driver of the recent retail trading boom, which also benefitted from pandemic-led stay-at-home orders and stimulus payments from the government. 

However, the surge in retail trading has not been without its issues. In June, Robinhood was ordered to pay $70 million in fines for failing to protect its customers. The Financial Industry Regulatory Authority (FINRA) claimed that the company had provided misleading information to customers and neglected the maintenance of its technology. 

But such regulatory controversies haven’t deterred people from joining the platform. In fact, Robinhood has seen its client base grow by over 22.5 million customers and doubled its revenue from the last year in its recent quarter.

Robinhood Shares Decline After PayPal News and SEC Scrutiny of Revenue Source

Following the disclosure of PayPal’s upcoming venture, Robinhood’s stock price declined nearly 7% yesterday. This downturn was further extended by SEC chair Gary Gensler’s interview with Barron’s where he said that order flow has "an inherent conflict of interest."

Brokerage firms like Robinhood send their customers' orders to wholesale brokers instead of exchanges. This controversial practice is known as Payment for order flow or PFOF. 

Shares of Robinhood have fallen almost 6.9% until now and are currently trading at $43.64. The stock was listed in the market in July and has appreciated by up to 25% in value. 

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