Robinhood goes after retirement funds

Why it matters: Robinhood's core business has been declining ever since it went public in July 2021. It had only 12 million active users in the third quarter — an all-time low in its history as a public company.

Between the lines: Robinhood's big profit engines have historically been options and crypto.

• Options trading surges during periods of speculative fervor; it slumps at times like the present, when investors are more interested in preserving capital than getting rich quick.
• Crypto, meanwhile, is looking even more moribund.

How it works: Robinhood's retirement account is aimed primarily at workers in the gig economy, who don't have an employer offering a 401(k) plan.

• The carrot: Robinhood is promising to add an extra 1% to all contributions. For every $100 deposited into a retirement account, up to the 2023 maximum of $6,500, Robinhood will throw in an extra buck.
• The theory, says Steve Quirk, Robinhood's chief brokerage officer, is that any match at all — even if it's small — is generally enough to nudge people to start saving for retirement. When employers offer matching on 401(k) plans, bigger matches don't generally result in greater participation than smaller ones.

What's next: Soon, says Quirk, Robinhood will start allowing people to transfer over their 401(k) balances — but it won't offer a match on those.

The big picture: If this product proves popular, it will help to lock in flighty customers — and should also significantly increase the amount of money that Robinhood's users have invested on the platform.

Our thought bubble: Robinhood's IRAs, where trading is likely to be much less active than in regular accounts, look more like a loss center than a profit center — especially given the 1% match.

• The product might be good in terms of building loyalty, but don't expect it to contribute meaningfully to Robinhood's bottom line any time soon.