Robinhood, the US investing fintech, is bulking up its UK offering by launching a product which allows its retail investors to earn income by renting their shares out.
Robinhood officially launched in the UK in March this year, after two previous attempts failed.
It launched in the UK pledging no commission fees and no foreign exchange fees on trades of over 6,000 stocks.
It is now launching a new product called stock lending-also known as securities lending- in the UK, following, it says, customer demand.
The move marks Robinhood’s first major product launch since its UK launch.
Likened to Airbnb, stock lending, which Robinhood offers in the US, allows the share owner to rent the shares to firms or investors and get paid in monthly interest if they find a match, known as passive income.
The borrowing firm might want to rent the stock to use as collateral or to use to meet regulatory obligations and it also used to short sell shares that have been borrowed, which can have a negative impact on their price.
Robinhood will earn a brokerage fee on the transaction.
The Robinhood stocks are backed by cash collateral at a third-party bank.
The lender, who must have at least £5,000 in there Robinhood account to use stock lending, can still sell the stocks if they are on loan if they want to.
Jordan Sinclair, president, Robinhood UK, said
“Stock lending is another innovative way for our customers in the UK to put their investments to work and earn passive income.
“We’re excited to continue to give retail customers greater access to the financial system, with the product now available in our intuitive mobile app.”
Stock lending does not come without risks and if the lender is lending a stock that pays dividends, the lender will get a cash equivalent of the dividend payment, which could mean a higher tax burden. The lender will also lose voting rights.
Robinhood, which launched in 2013 and found fame for commission free trading, has now expanded its offering in the US to offer the likes of retirement products and credit cards. In 2023, it made revenues of $1.86bn.
