 Good day, fellow investors. This week Robinhood launched a 3% savings account and the internet went ballistic over it. So that's very good. It is really disrupting the finance industry, as we know, but to be fair we have to look at what's behind the wall, what's behind the publicity and how do things really work. So I'm not saying Robinhood is good or bad, I just want to show you what's behind Robinhood and how they make money. It will give you good perspective. You probably can take advantage of Robinhood. There is not much risk or we'll discuss later how to manage that risk, but still let's discuss it and it will give you a better perspective of Wall Street, how Wall Street works and how Wall Street will always be Wall Street. Robinhood in or out. So they started checking and savings account, earned 3% of your money, pay no fees and excess over 75,000 ATMs at 3. This is really good. 3 means 3 plus a 3% savings interest rate on your saving, which is excellent. The main difference between a bank, okay Robinhood is SIPC insured while banks are FDIC insured. So they protect you for the amount or for the legal ownership you have not on the value of what they own, but as they will invest in treasuries that money, then you probably don't have to worry about the default of the treasuries or should you? That's a different story. Now they promise a 3% rate, however the one year treasury constant maturity rate is 2.72, they could have gone with 2.5 but 3 sounds much better. So they will be losing money on that. Why are they doing something like that? If they lose money, well you will also get something else which is a banking account, you will be spending money and they will split the fees with MasterCard. So they do not aim like Wall Street to make money on this. Probably they are using an Amazon strategy and that is good for the customer. If they don't make money, the customer makes the money and that's how you disrupt and displace an industry, which is good. And this is also something key for the company. They have one headquarter, unlike all other banks that have huge headquarters. They have 400 watt employees within one headquarter and they have received 500 million of funding. How do they make money? As I said the startup will split revenue from debit card transactions in a partnership with MasterCard and it will earn interest but the interest will be lower than what the customer gets. So they will be losing money there. However, when you look at the stock market trading Robinhood gets almost half of its revenue in controversial bargain with high-speed traders. So they are selling the order flow to high-speed traders that take advantage of your retail exposure. And this was pioneered by Bernie Madoff, you know him for a Ponzi scheme later, but still retail brokers like Robinhood focus on recruiting customers and building the trading interface but don't actually execute their client's orders. They outsource that to firms including Citadel, to Sigma, Wolverine Securities, etc. that pay for the right to handle those trades. Those traders again pair those trades with other trades and make some margins, really small margins on the trade. So they pay Robinhood less than 0.0024 dollars per share for each share that Robinhood brings in as a trade. And Robinhood shipped virtually all of its orders for stock trades to four high-speed markets and the bulk was bought by Citadel. This means that Robinhood might not deploy your trade to the cheapest offer, to the best offer there, you can always put a limit account, but that's something that they have to do to make some extra money and more than 50% of revenue or something came from that. Does that matter to you? The 0.02 or 0.001 doesn't really matter to you. Even if you are a trader, when that sums up over the full year, it will still be lower than one trade with a 14% dollar fee commission. So that's just explaining how Robinhood makes the money. So they are selling your trades to someone else, that's okay, they have to live off something. They are losing money on the interest, but it is insured, so that's something not sustainable, but they are still building, they are gathering people, they want to make a network of it, they want to get you in, and they will be doing for the next 10-15 years selling your products and then somewhere down the line, as with any other normal online disruptive business like Amazon, somewhere down the line 15-20 years from now, they might go for profits. However, there is one key component here, and we will see how that evolves, nobody knows. What if Robinhood does something that is risky, legal, borderline legal like it is selling your trades, is still not well defined, but what if they start doing things that are more risky just to survive, then we might have a Bernie Medd of Ponzi scheme, and that's the risk when dealing with Robinhood. However, if it's fraud, it's not insured by the insurer, that's also something important to know. And then something to do, okay, if you have little money, it's good to get 3%, if you have more money, if you have 75,000, 100,000, just put it in the treasury directly without going to Robinhood, because the treasury will give you 2%, the one month, two month, treasury, three month, and that's enough for you, and you are not taking any risks with some brokers, etc., etc., because when the market reverts, then is when the risks come out, if there are any. And when you see what are they doing, trading, how are they holding there, where will they be holding those liabilities, and who is the guarantee, who is the collateral, etc., etc., you can see that only when things go south. When things grow, if they are able to get funding, then you have nothing to worry about. So that's just something to put into the perspective of Wall Street, business, risk and reward. I think it's really laudable what they are doing with lowering commissions, even more disrupting the interest rate, but really be careful with the products, how they make money, not to get over excited about this. The key is, okay, if you know what they are doing, you can take advantage of them. If they start to take advantage of you by enticing you to trade, to do more options, trade more or risk your money in something that will not lead you to long-term wealth, that's something you have to be careful. So it's always about knowledge. Okay, if you have the knowledge, you can take advantage of these 3% checking accounts. If that really works, well, that's much better than something else you have. So it is something to think about. I have no connection with Robin Hood, I have no account, I have no shares to get. It's just something interesting that I wanted to comment because it's disrupting the industry. Just be aware of the knowledge and don't be taken advantage of such new schemes, take advantage of them and balance your risk reward carefully with what's going on and what are the opportunities and what are your risks, personal risks mostly. Thank you for watching. Looking forward to your comments, please, I will delete all the Robin Hood free shares links so don't even put them. See you in the next video.