Robinhood is rolling out a way to buy $1 slices of stocks in a bid to lure first-time users. The launch comes after bigger rivals matched it on zero commissions.

• Robinhood on Thursday said it would begin rolling out fractional stock-trading, underscoring heightened competition playing out in a fierce price war that's gripped the financial services industry for months.
• Abhishek Fatehpuria, a product manager at Robinhood, told Business Insider the decision to self-clear its trades back in October 2018 helped the start-up in rolling out fractional shares.
• The stock-trading start-up has aimed to make inroads with features beyond traditional stock-trading. In October it launched a cash management tool a year after it botched the announcement for a no-fee checking and savings account.
• Last month, Robinhood withdrew its application with a US regulator to become a full-service bank.
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One of the most popular trading apps for millennial investors is creating a feature that will help customers buy high-profile stocks like Amazon and Alphabet that may have previously been out of their price range.

Stock-trading startup Robinhood on Thursday said it would begin rolling out fractional stock-trading, underscoring heightened competition playing out in a fierce price war that's gripped the financial services industry for months.

The stock-trading start-up will allow its customers to invest in portions of stocks and exchange-traded funds (ETFs) with an account minimum of just $1.

That could open the door for more small investors to bet on names that have high prices per share without having to pony up for the whole thing - Amazon shares, for example, are about $1,760 each.

Abhishek Fatehpuria, a product manager at Robinhood, told Business Insider the new feature will be rolled out to some customers starting December 16, with the remainder of Robinhood's 10 million customers getting it either later this year or in early 2020.

The startup declined to provide the average size of users' accounts. Its 10 million customers are users that have been approved, but may not be active traders on the platform.

"I think the user that we're particularly excited about is the first-time investor that wants to get started and maybe has a couple of dollars," Fatehpuria said. "They can build a diversified portfolio with a majority of the stocks they want to own."

Other firms have rolled out similar features in recent months. JPMorgan last month began allowing some of its self-directed investing clients to trade fractional shares. Meanwhile Charles Schwab in October said it would begin offering fractional shares, the Wall Street Journal first reported.

Fatehpuria declined to specify when Robinhood began working on fractional shares, stating it's been something the startup has been thinking about "for a while." He pointed to Robinhood's in-house clearing service, which launched in October 2018, as a key step toward being able to offer fractional shares.

"Having an in-house clearing platform basically vertically integrated our business, which gave us a lot more control over how our systems work and interact with each other," he said. "As we thought about this product before, it was just a little bit harder when we had to work with outside partners."

Clearing trades internally also puts the onus on Robinhood to handle the fractions of stocks not bought by customers. As a result, that's additional risk the firm needs to account for.

Fatehpuria said a lot of thought was put into the additional nuances that fractional trading creates, but declined to offer specifics around what the company did to account for the risk. A Robinhood spokesperson declined to disclose whether additional staff had been hired to manage the new risks associated with fractional trading.

"We put a lot of thought into this, and we spent a lot of time building tooling around helping us understand this risk and track this risk, and it wasn't going to be something that really stopped us from offering this product," Fatehpuria said. "We built a lot of stuff around our systems to manage that risk."

Robinhood has aimed to make inroads with features beyond stock-trading. In October, it launched a cash management tool a year after it botched the announcement of a no-fee checking and savings account in December 2018.

The fintech has backpedaled on at least one new initiative. In November it withdrew its application with a US regulator to become an official federal bank.

Robinhood has also grappled with issues around one of its standard features. Members of the WallStreetBets sub-reddit - a forum full of avid day-traders and many Robinhood users who post about their activities - found a bug on the platform giving users access to infinite leverage. One user was able to grow $4,000 to $1 million using the glitch.

Soon after, Robinhood's vice president of product, Josh Elman, left his role less than two years after joining from the venture capital firm Greylock.

Robinhood said on Thursday it would roll out additional features. Early next year the start-up will begin offering a dividend reinvestment plan (DRIP), which re-invests users' cash dividends back into stocks or ETFs.

The feature is common among competitors including the discount brokerages TD Ameritrade, Charles Schwab, and E-Trade. It's been one of customers' most commonly requested updates, Fatehpuria said.

Robinhood will also soon allow customers to schedule recurring stock investments. A company spokesperson declined to comment further on the expected launch of the features beyond "early next year."