Episode 27
Robinhood and the UX of Financial Services Apps
Derek and Chris discuss the recent Robinhood scandals from a UX perspective. What role did the user experience of the Robinhood app play in the GameStop saga? How do financial service apps find the balance between design simplicity and providing necessary information and research? And also, how is Robinhood like Tesla? In Condensed Soup, Derek and Chris discuss what they would do with a life-changing amount of money.
Questions? Comments? Email us at UXSoup@strategyanalytics.com
Transcript
Welcome to UX Soup, a short-form podcast where we go beyond the buzzwords and look at the real end user perspective on tech developments in the home, in the car, and on the go. UX Soup is sponsored by Strategy Analytics, celebrating it's 25th year, providing clients with research, insights and expertise. I'm Derek Viita. Lisa is off today, but I'm joined by my other co-host, Chris Schreiner.
Chris Schreiner:Hello!
::DV: Today, we're discussing the user experience of financial service apps, which allow users to manage their finances, but also buy and sell mutual funds, individual company stocks and even new currencies like Bitcoin. These apps, Robinhood in particular, have been in the news stateside recently with congressional hearings around the role they played either explicitly or tacitly in manipulating the stock market, and driving up GameStop stock, and so on and so forth. But if we look at it from a user experience perspective, how responsible have these apps been truly? Is their design emboldening new generations of folks to expand their ideas of how to make and save money? Or is their design just encouraging engagement without considering context of use? We are talking about it today. So let's give a bit of a background here and start from a very qualitative base. Let's look at who buys stocks and why they are buying stocks to begin with.
::CS: Oh, in the US, at least in this country, it's a much broader base since our retirements are basically based on the stock market. In a lot of other industrialized countries, there may be better pension schemes and all that, but in this country, the stock market is pretty much central to everybody's life. So they're already familiar with it because their long-term trading, their retirement is dependent upon it, but that also leads them to learn more about it and want to get engaged in it earlier. And the appeal of day trading, of success stories that they might hear about the stock market, or in times of boom, they wanna get in on it, fear of missing out, that brings them into these kinds of apps that lend them to be able to engage with the market in that way.
::DV: One topic that I want to layer on top of that, though, is the fact that finances are one of these topics that is somewhat sensitive to certain people. They don't like talking about how much money they make. It also requires them to think in terms of their long-term goals and how much money they might need further down the road. And so you have these shrewd, long-term savers. You also have these people who don't think about these sorts of things at all. You also have a separate user base that is what I would call the capitalist casino-goers who are just interested in making a quick buck. So they're plugged into the stock market, but don't have, necessarily, any long-term goals here. They just want to be involved. This is sort of like these previous episodes where we talked about pet tech and fitness tech where there isn't one type of user. There are several different types of users. And so if you're designing an app or a web portal for financial services for purchasing stock, for purchasing and selling mutual funds, you really need to design for all of these types of users, which can be somewhat difficult.
::CS: Or you need to pinpoint who your one target special case is and design specifically for them. So take Robinhood, for example, who do you think that their target users are? Are they shooting for everybody, or are they trying to find a specific population?
::DV: Well, at rollout, Robinhood's main value add was that relative to some of these more well-established firms, they allowed free trading. So the barrier to entry is essentially removed. And in fact, wasn't Robinhood the one where they would allow you to purchase your first stock for free?
::CS: Yes, if you deposited a certain amount, I believe that they gave you a share or two in a company of their choosing. So yes, that's a barrier to entry that they removed that certainly got people in. I think the other elements of Robinhood that were key to their early growth was the simplicity of their app. If you go to a lot of financial service sites, the amount of research, because it is a very analytical, research-heavy endeavor, and that could be intimidating to users. They've stripped all that away, and it's like, "You want a stock? Buy a stock? How many? Good, go, done, swipe." And that makes that whole task just very, incredibly simple for them. And the other element of it is that removing barriers to entry to get into the stock market, they allowed the fractional purchase of shares. So if I wanted to buy a share of Tesla, I didn't have to have $800 or $1,000, whatever the share price of Tesla was. I only had to have $5, and then I could buy a fraction of a share and watch that grow. And I think that, more than anything, got a lot of people into it because allowed them to take their spare change, their little spare savings for the month and invest it.
::DV: So if we look at who Robinhood and apps like it, their target users are essentially people who are new to this paradigm for saving for later or making money in that way. 'Cause people who have no exposure to the stock market, to what mutual funds are, to what individual stock prices do on a daily basis, and just introduces them to this world.
::CS: Yes.
::DV: Because this barrier to entry of cost per trade has been completely removed. Is that right?
::CS: Yes, exactly, and allows them to just say, "Hey, I like Nike shoes, so let me buy... Let me take my $10 that I've saved up this month and invest it in Nike."
::DV: So if we're thinking about those specific users, what behavior needs to be designed for in a financial services app? What are they looking for?
::CS: The end user is looking for a very easy solution. They're looking for, "Minimal steps I have to take. I know I want to buy Apple. I've got this money, let me get Apple, the end." They don't need the fancy charts. They don't need the latest news and research on it. Robinhood provides a chart that shows you what it's been doing, nice, quick interactive chart, but very little else in terms of deep-dive research or what analyst ratings are for that particular stock. It's simplified, but it's a delicate balance that these financial services have to take because yes, you have these people that aren't as familiar with the stock market, why can't they come in and investment their money in companies that they like? But these are also people that would have to need some of that deeper information to be able to make smart choices about it.
::DV: Exactly.
::CS: And so if you are designing for these users, it's like, "How do you design that simplicity that gets them in?" But the knowledge that they need to actually succeed, these types of services have a vested interest in their clients succeeding because that means that then, they put more money into the app. So it's a delicate balance and it's easy to go one way or the other, and I feel that Robinhood, in particular, goes a bit too much toward the too simple side.
::DV: So Robinhood's initial goal was to design for just brutal simplicity to get as many people involved as possible. How has that evolved into 2021 and what we've seen in the news with the, depending on who you ask, the market manipulation or the explosive growth and success of stocks like GameStop and AMC?
::CS: Well, if you look at who are the drivers behind this whole GameStop situation, they weren't, these initial users, they weren't these people that were looking for simplicity. It was very knowledgeable and experienced people that adopted Robinhood primarily because they wanted to day-trade a lot, and the free trading element was the big draw for them. So now, you have, in addition to these people that were in there for simplicity, very experienced people that didn't need to have that amount of research that some of the other sites provide because they either knew enough or they knew where else to get that information. And those were the people that ended up driving what happened over the past few months. [chuckle]
::DV: That differentiation point is something that I want to ask about because Robinhood was very much like Tesla was in the automotive space where they came in with this fantastic, new idea of what the experience should be like. In Tesla's case, it was an EV experience and an in-car experience that was entirely touchscreen-based, and so on. Robinhood changed the game by just removing all those barriers to entry. Well, now, just like with Tesla, when we talk about EVs, now, Volkswagen is catching up with their EV experience, Ford is catching up with their EV experience. And over here in the financial service space, all of the other financial service providers have essentially caught up to Robinhood by cutting their barriers to entry as well. So now, how does Robinhood differentiate, other than badly, because they run into situations like they've shut down the ability to trade certain stocks?
::CS: Yeah, it is a very difficult situation for them. To go and use the Tesla example, what it seems like they've been doing for the last while is just riding on that reputation without a lot of differentiation. A lot of these other sites still allow for that more advanced experience, and Robinhood has always stayed away from doing that; it remains very simplistic. They've just stayed in that lane that they've been in, and that had been so successful for them, and riding on reputation. And now, we're gonna see what happens when that reputation takes a huge, huge hit.
::DV: Well now, as you say, all of these other legacy institutions that maybe have a better background in researching the mechanisms behind the trades, now, they're at somewhat of an advantage now that these barriers to entry have been taken away, and maybe they have put more R&D funds into design of their apps. It'd be very interesting to see what happens over the next year or two.
::CS: Yeah, they do have a bit of a challenge with that because they are... The consumer brand perception of them is Wall Street when someone thinks of Fidelity or TD Ameritrade, or Charles Schwab. That's not for them; that's for the professional investors, that's for their financial advisor. That's not for me, this person that really doesn't know a whole heck of a lot about stocks. So it's gonna be very difficult for them to convince consumers that they can fill that role.
::DV: I wanted to briefly include one point here at the end about protecting users from themselves.
::CS: Yes.
::DV: Robinhood, unfortunately, was in the news for bad reasons in 2020. There was a user of their app who purchased several stock options, and if you're interested in how those work, look it up because I have no idea. He woke up one morning and found that he had lost $700,000 or something like that, but had not actually lost $700,000 because he hadn't cashed in those options, very long story short. And there was a tragic ending to that story, and if you're interested in it, you can look it up. To what extent do Robinhood and apps like Robinhood have a responsibility to protect users from themselves in these very delicate decision-making processes? Because again, Robinhood's whole thing is democratizing the process, and removing those barriers to entry, and get people to participate in the purchase of funds and stocks, and so on and so forth. To what extent should they care about how their users actually use these tools?
::CS: I'm of the philosophical mindset that there is responsibly that they have to have. This goes back to what we were talking about at the beginning of the podcast about this balance between simplicity and making sure that they know what they're doing, or giving them the information to know what they're doing. And nobody should be creating a product or creating a service, and just throwing it out there and saying, "Well, we know some people are gonna use this improperly, or some people aren't really gonna know how to use it, but that's on them." I don't follow that mindset. I think that we need to know, have an understanding, or do some research to see how these things may be used. Again, look at who your target consumers are and how they might be using them. Do testing to see how they actually use them because you'll find out that there are shortcuts or things that you didn't expect that are going to happen. And help build on that, provide them. If they're gonna get into options, provide them a little more information on how they function so that they don't wake up and think that they lost a huge amount of money when in fact, they hadn't. To me, it's that kind of guidance that should be built in and should be part of the system.
::DV: A key portion of any part of product development is understanding how your product might potentially be misused, either accidentally or by some sort of bad actor. You can't just assume that everybody is going to know how to use your product and use it in the way that it is intended. So while I think that it's an open question, the extent to which Robinhood is necessarily responsible for all of the bad things that could possibly happen with the Robinhood app, if you're any sort of product or service being developed, that has to be an important station that you pass through on the way.
::CS: They should have a vested interest in wanting to do this because even if they're not going to be held liable, you're going to have a hit in your brand. You're going to get a lot of bad reviews or a lot of bad PR. So you have a vested interest in wanting to make sure that those things don't happen.
::DV: Well put, Chris. Time, once again, for our regular segment called Condensed Soup.
::CS: Condensed Soup!
::DV: This week on Condensed Soup, since we're talking money, let's talk about what each of us would do with a large, life-changing amount of money, however it is that we come about it, whether it be via the lottery or shrewd investment on Robinhood. Let's assume for this exercise that all debts have been completely paid off, both for ourselves and for our family, so we're starting from that baseline, and we now have this life-changing amount of money to do whatever it is that we would like to do. What, Chris, are you going to do with that money?
::CS: In trying to think about exactly what I would do, I have a process in mind. So first thing I want to do is get rid of a lot of benign unnecessary things that I do not enjoy. [chuckle] So I hate cleaning. [chuckle] I want to free up my time to do something that's more meaningful. I don't want it to be caught up in timesuck. I want to maximize the impact that this life-changing amount of money has now provided me 'cause I'm assuming that I'm retiring at that point. But to be able to do that in order to get deeply involved in charities, whether it be for animal rescues, or for the environment, or back when I was in graduate school, my apartment burned down, and the Red Cross was there the next morning to give me clothes. So I feel like I want to pay something back to them. So to be able to pick several different charities, just devote all of this time, after I've gotten rid of all the things that take up useless time.
::DV: I wanna know more about that apartment burning down, but wow, that's... [chuckle] That would certainly be a life-changing event. So I am of similar mindset where when I think about what I would do with a large life-changing amount of money, I would think about how I would spend my time after that. I think that I would still want to do something similar to what I'm doing right now because I love helping products and services become the most human-centered that they could possibly be. I don't necessarily want to do it for 40 hours a week, so if I can do it sort of as a on-the-side, as-requested service, I think that would be great. I would want to go and learn a new skill where I wouldn't necessarily need to make money off it. So I would want to go to school or to a trade program to learn wine-making, for example, or go and run a vineyard, or go and learn how to weld, or go and be an electrician, or something that is just so off the path of what I currently do in my nine-to-five where I would have the time and the lack of financial burden to be able to do that. That's what I would do.
::CS: That sounds nice.
DV::Great stuff. Thanks again, everybody, for joining us this week. Oh, reminder that UX Soup is presented, as always, by Strategy Analytics. Check out our user-focused insights on a variety of topics by visiting sa-ux.com. Please also visit ux-soup.com to check out our other episodes on the podcast. Subscribe on your preferred podcast platform or connect with Lisa, Chris or myself on LinkedIn or Twitter. Thanks again, bye for now.
