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The SEC's fine of $65M had a significant impact on Robinhood's business. It not only resulted in a financial loss but also damaged the company's reputation. The fine was imposed due to misleading users with the process of payment for order flow, which is a major revenue source for Robinhood, contributing to 80% of its revenue. This incident might have led to a loss of trust among its users, potentially affecting the user base and future revenue.
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Now for some weaknesses. The average Robinhood user has around $5,000 per account vs the average Charles Schwab user, which has around $100,000 per account. The Median amount in a Robinhood account is even lower at $240. This limits Robinhood's resources to grow. By contrast, Charles Schwab makes 50% of its revenue purely off interest from its users' accounts, which reached as high as $6.1 billion in 2020. Another way Charles Schwab makes money off account management fees, while Robinhood makes 80% of revenue from payment for order flow. This payment structure is also an external threat against Robinhood, as the SEC recently fined the company $65M for misleading users with the process.
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