Robinhood is offering users compensation after major outages - Business Insider

by a similar glitch just a week later. Both outages were caused by increased trading volumes that overwhelmed the platform, amid a volatile period for the stock market triggered by the coronavirus pandemic.

Offering compensation can help Robinhood avoid a legal battle and make amends with customers — but it might not be enough in all cases. Compensation can boost satisfaction with Robinhood, but there's a catch for users who opt to accept it. Reimbursing users for at least some of their losses during the outage could be enough to placate some. However, to receive the compensation, users have to sign an agreement that they will not bring legal action against Robinhood.

But the compensation offered might not be enough in all cases. At least one federal lawsuit was already filed on behalf of some Robinhood traders, and an injunction has now been filed asking to forbid the fintech from sending "further misleading communications" — like the ones about receiving compensation — to clients, and calling for all signed compensation agreements to be made void.

Regardless of whether this move succeeds in mending some customer relationships, the real focus for Robinhood should be avoiding outages in the future. Missing out on making trades due to platform issues has likely reduced some customers' trust in Robinhood. That exacerbates the platform's already difficult task of acquiring and retaining customers: Competition is heightening in the online trading space, with many legacy players fees to remain competitive with startups like Robinhood.

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