Robinhood, the popular online brokerage firm, has been under scrutiny from regulators and critics alike due to its Payment for Order Flow (PFOF) business model. Critics claim that this model prevents investors from getting the best price for a stock since orders are routed through market makers who profit from the bid-ask spread.

Despite these concerns, Robinhood's revenue continues to surge. According to analysts, its revenue is expected to rise another 108% this year and grow 37% next year. In 2020, the company's revenue surged 245% to $959 million, and it grew an additional 193% year over year to $1.09 billion in the first half of 2021.

Robinhood's growth trajectory is putting pressure on traditional brokerages such as Fidelity and Charles Schwab (SCHW), which serve millions of investors. However, even with increased competition from commission-free trades offered by other brokerages, Robinhood has managed to maintain its growth momentum.

One reason for this success is the company's appeal among younger investors. At the time of its initial public offering (IPO), 70% of its assets under custody came from investors between the ages of 18 and 40, with a median age of 31. Robinhood's free trades, streamlined app, and game-like achievements have made it a popular platform for younger first-time investors.

However, critics argue that Robinhood's PFOF model is not in the best interest of its clients. The company subsidizes client orders by selling them to high-frequency trading firms, which profit from the bid-ask spread on each order. This means that investors may not be getting the best price for their trades.

Despite these concerns, Robinhood remains a disruptor in the traditional brokerage industry. By offering free stock trades and a streamlined app, it has attracted millions of users who are looking for an alternative to traditional brokerages.

In conclusion, while Robinhood's PFOF model may have its critics, the company's growth trajectory is undeniable. Its appeal among younger investors and its innovative business model make it a force to be reckoned with in the financial services industry.

Pfof robinhood