Robinhood Chief Product Officer Aparna Chennapragada joins Yahoo Finance’s Brad Smith to discuss the launch of a Cash Card for consumer spending trends to unlock its next growth opportunity and improve the accessibility of crypto.
BRAD SMITH: Thanks for joining us here on Yahoo Finance Presents. Robinhood introducing a cash card combined with a new slate of benefits and rewards. Joining me now to discuss further is Aparna Chennapragada, who is the chief product officer over at Robinhood. Aparna, thanks for taking the time here with us today. Really appreciate helping us break down how this works.
And first and foremost, important to know that this replaces the existing cash management product. What data prompted this decision to launch Robinhood’s Cash Card?
APARNA CHENNAPRAGADA: Brad, thank you for having me. Really, really excited to share the next step in investing, which is spending. And as you said, the data and the insights that prompted this is the idea that for the next generation of folks, they have high interest in investing. But it is out of reach for many, because they’re caught up in the cycle of spending.
And so we built this spending account and a cash card– we call it the Robinhood Cash Card– to be able to turn spending into investing. And how we do that is make sure that as you think about, like– you go about buying your morning cup of coffee. Can we turn the round-ups, the spare change, into buying into crypto or stocks or funds? And I think there– we have a bunch of features there that would be really exciting for our customers.
BRAD SMITH: OK. And so naturally when we think about any type of card product, but especially a cash card or a debit card product, consumers, they might start to think about rewards. How do consumers amass rewards with a cash card like this?
APARNA CHENNAPRAGADA: There are three really amazing things about this cash card. One, of course, as I just talked about, this idea of turning spare change into investing, into crypto or stocks. Every little bit matters. The second thing is Robinhood itself, we’ll give you a weekly bonus to be able to encourage you to invest in, again, like, the assets of choice. And finally, we’re working closely with leading retailers to be able to, again, give more rewards for customers for doing the right thing, for being able to, like, invest in their today as well as tomorrow.
And Brad, one thing to think about here is the macro context here, right. I mean, I just this morning filled up gas, $6 per gallon. So people are– we’re feeling the pain of having to spend more and more on things that we need. So how do we make sure that we help you in that moment by giving you more rewards, by giving you more of a cashback or discounts? But at the same time, starting to help you to save for tomorrow. Because everybody feels the pain of inflation. And investing is one of the most powerful ways to start to kind of like hedge against that.
BRAD SMITH: And so with that nod towards inflation, how did that really give you a direction around the retail or experience partners that have signed on for some of these perks?
APARNA CHENNAPRAGADA: That’s right. I think one thing we think about is, like, look, spending is a fact of life. You cannot not spend on milk, gas, groceries, et cetera. So we’re working with partners that help– that ease the pain for our customers.
And the second thing is that for these customers, again, like, investing feels like so many levels away. So this is also about breaking down barriers. You do not have to wait for a long time to get started. And that’s how, if you look at the roots of Robinhood, that’s really at the core of our mission, to be able to democratize finance.
What does that mean? It is about giving access and inclusion to financial markets and not waiting for– until you accumulate wealth, right. You actually get started for as little as $1. And now we are saying, well, you just go about the way– life the way you do. You go about your day. Swipe the card, and then you start to kind of like invest. That’s, I think, the beauty of this cash card. And we’re very excited.
BRAD SMITH: You know, tracking Robinhood since even prior to the days of a publicly traded entity that you’ve become, and knowing how important cryptocurrency is, and introducing new accounts, new people to cryptocurrency as well– I naturally wonder with the amount of startups that we’ve seen in that crypto reward space, is that something that Robinhood through the cash card would be able to dive into for its customers later on?
APARNA CHENNAPRAGADA: Yeah. And I think the way we think about it is that we see, again, like with our customers– when we do the user research, these are debit primary young next generation of customers who are interested in investing, who are curious about crypto. But they’re not going to be the ones that kind of spend day and night or memorizing 16 digit hexadecimal incantations. And I think crypto is still inaccessible.
The power of crypto is that it’s an open financial system. So it’s very close and naturally dear to our mission. What we want to do is make sure that we apply the same principles that we’ve applied to investing, right, and with equities and stocks, to say, hey, how do we actually give intuitive accessible design? How do we make sure that folks can get started for, again, like, without having to have this huge barrier?
So already in this product two things have what I call embedded crypto in them. One is that you can start to– as you start to kind of round up your spare change and have Robinhood’s weekly bonus, you can choose to invest in crypto. So that’s an easy way that you can just start to say, OK, I can turn spending into investing in crypto.
The second is that you can also split your paycheck and say, most of it I want it to be in the spending account. But I want some of it to go into investing, whether in equities or in crypto. That’s another way, mainstream, a lot more customers and users can actually start to get into crypto without, again, like, going all in on it.
BRAD SMITH: When you think about some of the key performance indicators that come along with any type of new product launch, what would be the barometer to say that this rollout has been a success?
APARNA CHENNAPRAGADA: That’s a great question. And I think the thing for us– first of all, we’re rolling out in a very systematic, methodical way where we get a small group of customers really iterate and understand. And that’s what we’ve done with the crypto wallets. And we’re going to continue to do that.
And with this product, it’s about two things in the beginning. One is whether the card customers are actually finding it useful to turn spending into investing. So we want to make sure that that link happens in a very seamless, intuitive way.
I think the second, of course, is that how much are they starting to use the cash card for everyday essentials? Because that’s where our focus is on. Again, given the macro context, we really think that we need to ease the pain of our customers and give them rewards for spending on things that they need.
BRAD SMITH: So what investors are going to want to hear about and not just investors that are utilizing the platform, but those of Robinhood as well– what is the type of revenue opportunity that you estimate this brings to Robinhood?
APARNA CHENNAPRAGADA: I think there are two aspects here that we’re very, very excited about. One is if you think about it, this is an entirely new set of customers that we are reaching out to beyond the ones that are already investing in the Robinhood product. They’re actively actually trading, et cetera. So this is a new set of customers that have such a distance right now for investing. So this is about, like, growth. Like, getting more users on the platform.
The second, of course, is just like many of these card products, we also would, on the debit interchange– what we are doing is giving some of those savings back to the customer. But at the same time, have that business model work for us as well.
BRAD SMITH: Certainly. There has to be an added layer of security any time that we’re talking about a card product. And given that there is, of course, so much focus on digital wallets right now, perhaps it’s worth just clarifying. Is this primarily leaning more digital? Is this physical? How is that going to be engaged with from the consumer side?
APARNA CHENNAPRAGADA: This is one of the things we actually hope to learn in our testing and iterating. We have both. We have actually a virtual card that people can use. We have a beautiful, well-designed– you would expect that from Robinhood– a great physical card as well. Because we do see as the world is returning to kind of the post-COVID order, we do see that people want to spend– swipe the card. But of course, you can have digital transactions.
One additional layer of security we have in the product, again, is that you can lock the– you can basically lock up the card from within the app. So that you can– anytime you can freeze the account. We’ll alert you if there are ways that the card is being used that are anomalous, you know, 3,000 miles away for example. And we’ll make sure that, like, you can actually do these in app.
And the thing I want to emphasize here is that that is the– that’s the secret sauce of thinking about design principles that are mobile first and for this generation of customers, who are intuitively used to using their apps for a lot more of everyday use cases. And we think that your cash card should also work that way.
BRAD SMITH: Certainly. OK, so that brings me to my next question. And I have to hustle to my finish here. But the added layers of security that you think about even when rolling out a cash card such as this.
APARNA CHENNAPRAGADA: Right. I do think that along with the in-app controls that we have, we want to make sure– of course, we have a robust fraud control system, anti-fraud machine learning and AI systems that Robinhood uses today. And we have extended them to support the cash card.
On top of it, we are rolling out a systematic wait list and kind of roll off the wait list model, so that we can, again, iterate and learn from the customer behavior, customer usage. But I think what is most exciting for us to look forward to is the idea that you don’t have to change any of your existing spending behavior. You swipe the card. You buy the things that you need. You spend on things that you need.
But automatically, we start to get you into turning into an investor without you trying to have to think in a very, very conscious, exhausting way.
BRAD SMITH: Certainly. How many people are on the wait list right now on day of launch, going into that?
APARNA CHENNAPRAGADA: We are going to announce the product, Robinhood Cash Card. And then we’ll announce the wait list as well.
BRAD SMITH: Understood. And then just lastly, I mean, any time we think about a cash card or a debit card that’s annexed to another account, we think about ATMs. Is that something that, in addition to this rollout, you see as the future for Robinhood to engage with and allow some of their users to have an ATM access to also still tap into cash, should they need it through this cash card?
APARNA CHENNAPRAGADA: We already partner with ATM providers. There are no ATM fees, no overdraft fees, no hidden fees. Again, this is what you would expect from Robinhood. Making sure that the experience and the economics work for our customers.
One way I think about this is this is a debit card that rewards you like a credit card, without the fees, without the onerous interest rates and so on.
BRAD SMITH: Aparna Chennapragada, who is the chief product officer over at Robinhood. Aparna, thank you so much for taking the time with us here today.
APARNA CHENNAPRAGADA: Thank you, Brad.
BRAD SMITH: Appreciate it.