FIS, Fiserv and Infosys compete for Robinhood’s core banking tech deal

Robinhood plots a retail bank in the US

FIS, Fiserv or Infosys will be providing core processing software to Robinhood Bank once it receives authorisation from the Office of the Comptroller of the Currency (OCC).

Robinhood has applied for a national banking charter to launch a consumer-focused bank in the US.

“Robinhood currently uses innovative technologies to deliver brokerage services to US retail consumers. It proposes to leverage those same and other innovative technologies to offer banking services in a safe and sound manner to US retail consumers,” it explains in its application to the OCC.

Also in the application, Robinhood says the core processing technology will be provided either by one of the two US tech heavyweights, FIS or Fiserv, or by India-based Infosys. The latter already provides its Finacle core banking platform to another digital banking start-up, Marcus (launched in 2016 by Goldman Sachs).

Robinhood will then combine the banking information technology services from the selected core processing vendor with its existing customer-facing platform to deliver banking products and services to its customers through a smartphone application and online.

Robinhood states it “has significant experience building and maintaining financial services information technology platforms in highly-regulated environments”. For instance, in October 2018, it had become “the first brokerage firm since Vanguard (in 2008) to build its own securities and options clearing system from scratch. This required close coordination with, and approval from, the Financial Industry Regulatory Authority, the Depository Trust & Clearing Corporation and the Options Clearing Corporation.”

The form also says it has recently migrated the clearing of its retail brokerage customers’ securities and options transactions from its partner clearing broker-dealer, Apex Clearing Corporation, to a new affiliated clearing broker-dealer – Robinhood Securities. “Moving clearing in-house will enable Robinhood to reduce fees and will give Robinhood more account and trade information so that it can offer enhanced customer support,” it explains.

“Robinhood’s engineering team is key to its competitive advantage,” it states. “The team has built systems and processes for internal, third-party, and regulatory audit. The security team has extensive experience preventing and mitigating risks of user account takeover, external attack, and internal compromise. The data team has sophisticated systems and processes for real-time alerts and monitoring. Robinhood’s internal security systems are modelled after ISO 27001.”

Furthermore, the company has not experienced a major data breach event to date, it points out, despite its “large size and rapid growth”.

Robinhood Bank will be headquartered in Menlo Park, California. Its services will come with no monthly fee and will be provided “in a fully transparent way through the ease of a smartphone”.

The company says it “will establish a profitable banking franchise by understanding the needs of its customer base, providing its customers with banking products and solutions that help them reach their financial goals, and building loyalty through exceptional and consistent performance and a high level of service”.