A critique of Robinhood's gamified interface

Robinhood, the millennial-oriented fintech investing app, is having a bit of a moment right now. Its smooth app interface provides users with a convenient way to trade or invest in securities directly from their smartphone. The economic crisis caused by the Covid-19 pandemic has only boosted Robinhood’s success, as the resulting market volatility has piqued the interest of many people, especially young adults, to start investing. The company saw a rise of 3 million users during the first quarter of this year. Improving financial technology, coupled with the Covid-19 downturn, has created a unique opportunity for young investors to capitalize on. However, Robinhood’s addictive design poses a risk that must be addressed. 

The effect of Covid-19 on young, first-time investors cannot be understated. Aside from Robinhood, other online brokerage firms such as Charles Schwab, TD Ameritrade, and Etrade have also seen a spike in new accounts of up to 170% earlier this year, especially among young investors. The exact reason behind this surge is unclear, but it seems likely that the economic downturn has encouraged many to put more focus on their finances, perhaps for the first time, or look to gain on a market comeback. And for those looking to do so, financial technology has made it easier than ever to start investing. In addition to providing an easy-to-use app, Robinhood offers zero commission and fractional trading, which allows people to start investing without putting down large amounts of money. GCI’s own Robert Mortimer is one of many who finds Robinhood to be a great way for beginner investors to gain experience, as he explains in “What a Robinhood Account has Taught Me About Investing.” More seasoned investors may not like the app’s barebone platform, which provides minimal equities research and data, but for those who are just starting out, the simplicity and ease of trading are unmatched.  

Robinhood certainly has its benefits, but people are less aware of the potential drawbacks. The very same app design that seems to have given Robinhood a competitive advantage over other traditional brokerage accounts has also been a source of criticism. Critics say that the app, with its offers of free shares of stock for joining and recruiting friends, flashing green and red colors, and bursts of virtual confetti, has turned stock trading into a game. This gamified design definitely appeals to many, especially Gen Z and millennials: users check their accounts an average of 10 times a day. Baiju Bhatt, co-founder of Robinhood, mentions that the app’s users interact with it more like a social media rather than a stock trading app. If Robinhood is seeking to emulate the addictive nature of social media, it certainly has succeeded–in the first three months of 2020, Robinhood users traded forty times more shares than traditional brokerage firm Charles Schwab’s users. 

In the eyes of many, the lighthearted nature of the Robinhood app fails to truly convey how serious investing is. Novice investors, perhaps bored at home during this time of quarantine, can be deceived by what seems like a grown-up version of a mobile game. For starters, the flashing green and red lights, as well as the confetti, often lead users to act on their emotions instead of keeping a calm and level head. The green lights and confetti serve as subtle but prevalent psychological rewards for users. Likewise, the red numbers on the screen invoke feelings of anxiety and fear that may drive users to make irrational choices. These design choices may seem small, but their power should not be underestimated: research has shown that the color red reduces people’s willingness to take on risk, and the color green often encourages people to sell. This means that Robinhood users may overreact to falling stock prices or get too excited at rising ones. Given the frequent trading activity on the app, many Robinhood users may end up hurting themselves in the long run by acting upon short term swings in the stock market. 

The app’s accessibility, combined with the emotional cues, can quickly lead inexperienced investors in too deep as they pursue a dopamine rush from their screens. The most prominent, and tragic, case of this is the recent suicide of a young college student. Alexander Kearns began using the app during the pandemic after schools shut down. Despite having little investing experience, Kearns was approved to trade options on margin on the app. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell a security for a previously established price within a specific timeframe. Given the limited timeframe, options trading can be highly speculative, and it is generally not recommended for investors with little experience. For Kearns, doing so cost him his life: he committed suicide after seeing a negative $730,000 balance on his account. Even more tragic is the fact that Kearns did not actually lose as much money as he thought–the balance did not reflect user portfolio value or debt. Instead, it was most likely due to complex options trades which can take many days to settle. 

No doubt the risks behind options trading make it a challenge to be avoided by novice investors, yet Kearns was able to easily begin trading them on Robinhood after filling out a simple questionnaire, revealing that Robinhood has become perhaps too accessible. In the wake of Kearns’ suicide, Robinhood has promised reforms such as an increased customer service department, more in-app education tools, and changes to its interface surrounding options trading. Still, concern remains over the efficacy of these reforms in preventing novice investors from engaging in high-risk activities when at its core, Robinhood’s gamified design enables them.

Robinhood has unquestionably dismantled barriers to trading: gone are the days when trading was an activity only accessible to those with a small fortune available to set aside. Beyond the app itself, Robinhood’s disruptive innovation has had far-reaching implications for the industry as a whole, as traditional brokerage firms scramble to incorporate zero commissions, fractional trading, and mobile apps into their services in order to stay competitive. As finance continues to democratize and novice traders enter the fold, new risks will emerge alongside new opportunities. 

Nobody could have foreseen the tragedy that arose. However, it seems like in the quest for innovation, Robinhood ignored any potential warning signs and designed a downright addicting app that may encourage poor decision making. Robinhood, and other similar companies, must honor their responsibility of innovating in ethical ways in order to truly improve the financial industry for everyone. For Robinhood, this means reconsidering the gamified structure of the app.