Robinhood's Misleading Communications

Investment app Robinhood will pay $65 million in fines for misleading customers. The 2013 start-up has grown rapidly, attracting younger, inexperienced investors with no-fee accounts and no minimums. But Robinhood generates revenue through “payment for order flow,” essentially a kickback from Wall Street firms and the same practice Bernie Madoff used to defraud investors.

Robinhood uses behavioral nudges and notifications to push users to invest in riskier stocks, resulting in higher trading volume, sometimes dramatic losses—and more revenue for the company. An NBC article describes the visuals:

When smartphone owners pull up Robinhood’s investment app, they’re greeted with a variety of dazzling touches: bursts of confetti to celebrate transactions, the price of bitcoin in neon pink and a list of popular stocks to trade.

Charles Schwab, meet Candy Crush.

A competitor compared the design to Las Vegas.

Of course, all is well when stocks go up, but when stocks decline, users have to make up the loss. For one 20-year-old man, his bill appeared to be $730,000, and he committed suicide.