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Robinhood can overcome its limitations and grow its resources by diversifying its revenue streams and increasing the average account balance of its users. It can do this by offering additional services and products that attract higher net worth individuals. For example, it could offer premium account options with additional features, or it could provide wealth management or financial planning services. It could also consider implementing account management fees like Charles Schwab. Additionally, Robinhood could work on improving its reputation and trustworthiness, which could attract more users and increase the average account balance.
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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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