Still, the company's growth is notable. It said this week it has reached 4 million accounts, double what it had last fall, and more than E-Trade's 3.7 million.

Robinhood did point to two key sources of cash: a tiered monthly fee for a premium trading product and the interest it makes on uninvested customer cash.

While E-Trade reported a 28 percent increase in net revenue to $708 million in the first quarter, Robinhood would not share specific information about revenue since it is a private company.

On Thursday, the start-up announced it raised $363 million in capital, valuing the company at $5.6 billion. That makes it about one-third the size of the online brokerage E-Trade Financial, which has a market value of nearly $17 billion.

After raising more money from top Silicon Valley investors, Robinhood has quadrupled its valuation in about a year to more than $5 billion. Less clear is how the operator of a commission-free stock trading app generates enough money to justify such a lofty amount.

Whether or not Robinhood is ultimately successful, big investors are taking more notice of digital finance start-ups. This week, asset management giant BlackRock announced it led a $50 million investment round in Acorns, an app that lets users automatically invest spare change in exchange-traded funds. Acorns has signed up more than 3.3 million accounts.

Stash, an investing app that lets customers begin investing with as little as $5, said in mid-April it had 2 million customers. It raised $37.5 million in fresh funding in February from a group led by Union Square Ventures.

"When millions of millennials are saying, 'yes sign me up,' the incumbents have to pay attention and valuations are just going to have to keep on going higher," said Javier Paz, a senior analyst at Aite Group's wealth management practice.

Robinhood launched its no-fee stock trading app about three years ago and has big ambitions beyond being a stock brokerage. It began options trading last year and limited cryptocurrency trading this year.

"In the next couple of years, I think you'll see Robinhood looking like a full-service consumer finance company," Baiju Bhatt, Robinhood co-founder and co-CEO, told CNBC on a phone interview this week.

The subscription product, Robinhood Gold, rolled out in September 2016, offering margin trading and extended-hours trading. It allows users with a minimum balance of $2,000 to trade on borrowed money, as much as two times what they have on deposit, for a flat fee depending on the amount.

Margin trading, a common feature of online brokerages such as E-Trade and Interactive Brokers. But Robinhood charges differently for these margin trades. While the traditional online brokerages charge interest on a specific loan amount, Robinhood Gold's flat monthly fee covers how much "buying power" a customer requests.

Trading $10,000 on margin would incur a 3.2 percent annual loan rate at Interactive Brokers, and 9.75 percent at E-Trade. That's $320 and $975 a year, respectively.

Robinhood Gold charges $40 a month for $8,000 in buying power, or $50 for $12,000, regardless of whether the investor uses the full amount. That would be $480 and $600 a year, respectively. For an investor wanting access to $10,000 a year, the monthly fee adds up to $600 a year.

"They tend to be on the low side, but not the lowest," Aite's Paz said. "They have to make some money somehow, and this is allowing them to ride alongside the bull market."

"If the market starts to top and starts to retrace, they're not going to see as much money on their margin lending business," Paz said. "Other brokers don't have as much dependence on margin lending."

Robinhood said in October that 75 percent of its transaction volume went through its Gold product, which was growing 17 percent month-over-month. The company said this week it had no updated figures to share.

"It's a very unique approach they've taken," said Bill Capuzzi, CEO of Apex Clearing, which manages the infrastructure and operating systems for Robinhood and other financial services companies. "They tried to demystify what margin is."

"Online brokerage was a dying business and the margins were rotting and you only had the big players," Capuzzi said. "In comes this start-up [that] goes to 4 million clients. [It] just goes to show there's still a lot of room in the market."

Robinhood said the 4 million accounts figure refers to accounts approved to trade, but may not all be funded.

How much money those users end up storing in Robinhood also affects its revenue, since the company collects interest on customer deposits, similar to a bank. Account sizes range from $50 to millions of dollars, the start-up said.

— CNBC's Eric Rosenbaum contributed to this report.