Fintech start-up pulls plan for bank

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 nofee stock trading company to offer banking products by itself. Right now, Menlo Park, Calif.-based Robinhood would need to enter partnerships with banks to provide services such as debit cards. A 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. “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 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 a $1million position based on a $4,000 deposit.

Robinhood joins fintech company Social Finance, which also pulled its application for a banking charter.