Commissions were only 7% of Schwab’s revenue. The real money is in 1) net interest on money in settlement funds, and 2) payment for order flow. For details see e.g. Matt Levine’s most recent news letter.
“Only” 7%... that is definitely real money and they would have probably preferred to keep it coming in
Yeah but so is their marketing budget. I’m sure this move is driving lots of new customers in the door.
Much more likely that it's keeping them from leaving.
I'm a former RH user and I switched to Schwab so I could get an IRA. I'm guessing more people will be switching now that the fees are the same.
Are we sure the PFOF money was as material as the commissions were? Are we sure PFOF is really how Robinhood makes their money? There are other weird side hustles that e.g. make Robinhood money based on how many of their users hold and trade meme stocks, for which they collect short lending fees.
Schwab discloses their PFoF in their annual reports. It is 1.4% of their annual revenue. Page 31 of their 2018 10-k or, if you want a search string, Ctrl-F for "Order flow revenue was $139 million during 2018, $114 million for 2017, and $103 million in 2016. "