yesMario AguilarNone
×

Get access to Protocol

I’ve already subscribed

Will be used in accordance with our Privacy Policy

Power

Markets are in turmoil. How do trading apps react?

Coronavirus stock sell-offs are stressing some fintech startups. But they all want customers to stay calm.

Fintech apps on a phone

Robinhood had a rough start to the week. What happens if the markets don't calm down anytime soon?

Photo: The Washington Post via Getty Images

Picture this: As the market plummets 7% amid fear-soaked volatility, your extremely popular investment app goes down — for the third time in a week. You've already been sued for the last screwups. Forget bad: This is catastrophic.

And so, Robinhood's week began.


Get what matters in tech, in your inbox every morning. Sign up for Source Code.


As the effects of coronavirus reverberate through financial markets, Robinhood's failures have thrown a spotlight on new investment apps and services. If they don't work during a time of crisis, they could find themselves in hot water with customers, regulators or both. A lawsuit filed against Robinhood is attempting to gain class-action status. In a statement last week, a spokesperson for the Financial Industry Regulatory Authority, which regulates brokers, said that it was in touch with Robinhood and "closely monitoring the situation."

"We know this interruption was frustrating for our customers – especially after last week and on a day that trading was halted market-wide," a Robinhood spokesperson said in a statement. "Our platform is now fully operational and we're working hard to improve our service during these historic and volatile market conditions." Last week, it blamed outages on many factors, including "highly volatile and historic market conditions; record volume; and record account signups."

In a survey of investment app startups contacted by Protocol, companies unsurprisingly were very confident in the robustness of the systems they had in place. (Citing cataclysm, many executives could not be pulled away from their work today.)

Betterment's director of investing Adam Grealish said the company had seen some increased login activity in recent weeks but nothing that had stressed its systems. With the exception of a brief pause earlier today when the S&P 500 stopped trading for 15 minutes due to market conditions, trading has been uninterrupted. He said the company, which just boasted crossing 500,000 users, is prepared for volatility.

"In terms of the technology piece, we stress test our technology on load, on trading volume," Grealish said. "We're constantly doing platform improvements to that end with the ultimate goal of having a stable product in calm and choppier markets."

When Betterment's automated systems detect that there are big swings in the market or of particular securities, alerts warn its team of human investors that it's time to take a look. It doesn't stop or initiate trades, it just says "you should probably start looking at this and understand what's going on," Grealish said. Betterment clarified in a fact-checking email that its team "is always closely monitoring, especially, in a time like this!"

It should be noted that Betterment was criticized for halting trading on its app for 2.5 hours following the UK's June 2016 vote to leave the European Union. It was also separately fined $400,000 by FINRA for rule violations.

In a statement, Betterment's robo-adviser competitor Wealthfront also told Protocol that everything was totally fine: "Our ecosystem is operating exactly the way we intended it to in a climate like this, and we're seeing the behavior we expected from clients."

So did a spokesperson for the cuddly investment app Acorns, who said that the company "does not anticipate any outages related to market volatility."

A Wealthfront spokesperson suggested that, as with Robinhood, volatility might be spurring signups: "From a new signup perspective, when the market began to drop the last week of February, we saw a spike in new investment account opens."

But Grealish said that Betterment's clients haven't been engaging in any kind of mass sell-offs and are, if anything, "looking to deploy capital opportunistically."

"We've seen, actually, last week ad hoc deposits increase over what we normally see," he added. "So it suggests that our customers are taking an opportunity to add money to their longer-term goals, their retirement goals, things like this — money that was sitting in cash before."

Related:

Still, top of mind right now for many of these apps seems to be customer communication.

Stash's CEO has sent out a pair of messages to customers via email and in-app notifications, including one this morning explaining the effects of market volatility like a straight-talking high school teacher. Betterment pushed out an extremely simple explainer with possible actions from Grealish in-app. (Tip No. 1? "Do … nothing! The act of staying put is often the best thing an investor can do.") And members of SoFi Invest received a notification warning them that market volatility could lead to stoppages.

Indeed, all the apps have their own ways of saying the same thing: Calm down. Don't freak out. Don't pull your money out of our investing service!

"The behind-the-scenes conversations are really focused on educating our investors and preventing them from panic selling and regretting that decision later," said the Acorns spokesperson.

Microsoft wants to replace artists with AI

Better Zoom calls, simpler email attachments, smart iPhone cases and other patents from Big Tech.

Turning your stories into images.

Image: USPTO/Microsoft

Hello and welcome to 2021! The Big Tech patent roundup is back, after a short vacation and … all the things … that happened between the start of the year and now. It seems the tradition of tech companies filing weird and wonderful patents has carried into the new year; there are some real gems from the last few weeks. Microsoft is trying to outsource all creative endeavors to AI; Apple wants to make seat belts less annoying; and Amazon wants to cut down on some of the recyclable waste that its own success has inevitably created.

And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.

Keep Reading Show less
Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

People

Expensify CEO: ‘Most CEOs are not bad people, they're just cowards’

"Remember that one time when we almost had civil war? What did you do about it?"

Expensify CEO David Barrett has thoughts on what it means for tech CEOs to claim they act apolitically.

Photo: Expensify

The Trump presidency ends tomorrow. It's a political change in which Expensify founder and CEO David Barrett played a brief, but explosive role.

Barrett became famous last fall — or infamous, depending on whom you ask — for sending an email to the fintech startup's clients, urging them to reject Trump and support President-elect Joe Biden.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

The failed Visa merger was a lucky break for Plaid

Plaid COO Eric Sager says the deal's collapse won't derail the fintech startup.

In some ways, Plaid stands to benefit after its big deal with Visa fell through.

Image: Jonas Leupe/Unsplash

Plaid spent most of 2020 preparing to be gobbled up by Visa. Heading into 2021, it's going it alone again — and with a potentially higher valuation and newfound freedom from a giant corporation, it might be better off.

If it had gone through, the merger with Visa would have combined a rising star of the fintech revolution with one of the old guards of the financial services industry. But Visa said last week that it was ditching the $5.3 billion deal to avoid a "protracted and complex" legal battle with the Justice Department, which had sued to block what it considered an anticompetitive merger.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Protocol | Enterprise

Why Oracle and SAP are fighting over startups

Did someone mention a chance to burnish reputations and juice balance sheets?

New cloud-based offerings and favorable contract terms are convincing startups to switch to software from Oracle and SAP earlier in their lives than your might expect.
Jane Seidel

In the hunt for their next big-ticket customers, SAP and Oracle are trying to cast off reputations as stodgy tech providers by making a huge push to provide their software to startups.

Both companies have found themselves in choppy waters recently as potential customers have turned to the cloud, shunning the on-premises solutions SAP and Oracle are known for. That's coupled with a global pandemic that dried up demand for the expensive enterprise-grade software that drives profits at the vendors.

Keep Reading Show less
Joe Williams

Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

Drip Capital found a way to fund small manufacturers that big banks didn't touch

Manufacturing businesses in India and Mexico might wait 60 days or more for payment. Drip covers that gap without asking for collateral.

Drip Capital helps small and medium-sized businesses in emerging markets to bridge the gap between shipping products and receiving payment from the buyer.

Image: CHUTTERSNAP
Back in 2015, Pushkar Mukewar and Neil Kothari thought they'd hit on a startup killer idea. It turns out, five years later, that they may have — only, at the time, they'd taken it to the wrong market.
As first-time entrepreneurs, the Wharton classmates originally started Drip Capital to provide financing for U.S.-based small businesses that needed capital to produce their products. The pair, who share engineering and finance experience, tried a number of strategies to build out the startup, including attending many trade shows to get face-to-face with potential customers.


But no dice: Their U.S. product wasn't differentiated enough, as one of many options for American manufacturers. Eventually they decided to draw on their family backgrounds and focus on small and medium-sized businesses in emerging markets, where it's harder to get financing to produce products for overseas buyers.

"It's much easier to acquire customers [there] because the cost of acquiring customers is less and those are unexplored markets," Mukewar said.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Latest Stories