Robinhood Markets Inc. is pulling its application for a banking charter just months after starting the process, underscoring the challenges for start-ups trying to take on the highly regulated world of finance.
The application, filed with the Office of the Comptroller of the Currency, would have allowed the no-fee stock trading company to offer banking products by itself. Right now, Menlo Park, Calif.-based Robinhood would need to enter into partnerships with other banks to provide services like debit cards. A company spokesman said it has no plans to resubmit its application.
“We are voluntarily withdrawing our OCC application for a national bank charter,” spokesman Dan Mahoney said in a statement. “Robinhood will continue to focus on increasing participation in the financial system and challenging the industry to better serve everyone.”
Robinhood has been in regulators’ crosshairs after a failed checking and savings product launch late in 2018, which it announced without lining up the requisite insurance or approvals. After scrapping the product following regulatory blowback, Robinhood announced a new variation in October, slated to be called Cash Management, but it has yet to officially launch.
The company acknowledged earlier this month that some of its customers took advantage of a flaw that allowed them to make highly leveraged trades without putting down enough cash to back the transactions. One trader bragged about taking an eye-popping $1-million position based on a $4,000 deposit.
Robinhood is not the only fintech company to apply for a banking charter and fail to win one. Social Finance Inc. eventually pulled its application and Jack Dorsey’s Square Inc. is still waiting to see if it will be granted approval. Without the charter, the start-ups typically must pair up with existing, licensed banks in order to offer bank-like services on their platforms, for example checking accounts and debit cards.
CNBC earlier reported news of the withdrawal.