By now, the entire market is aware that there was a major outage at the investor app Robinhood on Monday just as the market experienced the highest one-day point gain in its history.

Not good, to put it mildly.

Then, on Tuesday, we learned that the tech outages were still ongoing. 

We immediately received media outreach from firms looking to add commentary to any stories we planned to write on the event, since Robinhood is now officially a fintech unicorn, with a $7.6 billion market valuation as of July 2019, raising well over $800 million in funding through its Series E rounds. 

Stop for a moment and think about that number.    

Now don’t get us wrong. Robinhood has some impressive backers, including Sequoia Capital and DST Global. They launched to much fanfare in 2013 via an app offering free stock trades, and were labeled the edgy, startup darling of the trading universe for some time.

But now they look positively foolish. The firm had grown in scale massively, with millions of customers investing through the app. Now, as a guy or gal carrying their iPhone around and trading Apple or Bitcoin, you might not think about what goes on in the background to make that trade happen.

It turns out you should.

“Fintech organizations are under pressure to provide new levels of speed, accuracy, and innovation, and always-on availability,” said Bob Moul, CEO of machine data intelligence platform Circonus. “Now more than ever, companies competing in the fintech space need infrastructure monitoring that can help them map out a data strategy that can accommodate for peak demand like the one they experienced on Monday.”

Translation – make sure your tech stack is in order.

Robinhood previously utilized Apex Clearing, which labels itself a “digital clearing & custody engine that provides a suite of innovative technology solutions that support the complete trading & investing lifecycle”. 

Apex also clears several other very large roboadvisors, with millions of customer accounts. When you go to input an order to buy or sell on one of these trading apps, it doesn’t just magically happen. There must be a reliable middleman – a clearing agency – to facilitate those trades. Robinhood recently elected to “self-clear” and walk away from having third-party custodian Apex clear their trades. Clearly they were assured by their IT consultants that they had a robust enough tech stack in place to carry this off.

But the outage on Monday and Tuesday suggests that they didn’t.

According to Bill Taylor, Managing Partner of Entoro Wealth, who previously ran a clearing firm that was later sold to Goldman Sachs, becoming a self-clearing firm was not a good idea. 

“Many firms believe they can realize cost savings by pairing up their customers with outside firms, without using a third-party clearing broker,” said Taylor. “The primary business of a clearing firm is to facilitate a transaction between two different parties and assume that risk. You can cut costs by eliminating that middleman and self-clearing that trade, but if your tech stack has vulnerabilities and is not capable of handling exceptionally high volume, which does occur on some trading days, then you are not going to be able to process those buy and sell orders. It certainly can do a lot of damage to your brand.”

Where does Robinhood go from here? That remains to be seen, but this should remain a cautionary tale for other major robos and investor apps to take a good, hard look at their tech stack and be doubly sure it can handle ultra-high trading volume when the markets get volatile, without crashing. 

According to one high level industry insider, failure to do so could very well send investors, who previously liked being with “edgy” robos, back to the now free trading platforms provided by legacy firms like E*TRADE, TDAmeritrade and others.