The massive outage experienced by investment and trading platform Robinhood caused thousands of its users to miss out on the historic rally this week. Fortunately, the company did announce that it would provide compensation for its users in the form of discounts.
According to the California-based financial services company, the outage wasn't caused by a hack or any kind of hardware and software glitch. It stated that the massive outage on Monday and Tuesday was due to heavy stress on its infrastructure caused by a surge of users all doing multiple transactions at the same time. The unprecedented amount of users on its platform caused a "thundering herd" effect which led to a failure of the company's DNS system.
As compensation, the company stated that all Robinhood Gold premium subscribers will be getting three months of free service. The service itself typically costs $5 per month plus a 5 percent annual interest for the money borrowed for trading. Users also get access to the company's extensive research reports, live NASDAQ data, and value-added services such as instant deposits.
Given the current rate, users will get a total compensation of $15 each. Looking at the bigger picture, the amount is woefully insufficient as some users could have made significantly more if they had access to their accounts during the massive rally earlier in the week. Theoretically, users could have made thousands of dollars if they had bought stocks like Apple, which had surged by more than 9 percent on Monday.
Affected users are being advised to immediately contact the company to ask for compensation. Robinhood also stated that it is actively trying to contact impacted users on an individual basis and is considered additional compensation depending on the circumstances experienced by any one particular user. This includes possibly reimbursing money lost caused by the outage.
While its initial compensation plan may sound minuscule, the company does have more than 10 million users, most of which were impacted by the outage. The same users also missed out on profiting from the record $1.1 trillion market gain earlier in the week.
The startup Fintech company, valued at over $7.6 billion, will likely have a lot of work ahead of it to regain the trust of its users. Robinhood co-founders Baiju Bhatt and Vlad Tenev both assured users that they are doing everything they can to avoid a repeat of the outage and that they recognize the impact it had on everyone. To prevent a repeat, the company stated that it is working on improving its infrastructure to handle larger loads and implementing additional redundancies to better handle software and hardware issues.
