It seems like every week there is a new entrant into the US deposit taking space. Clearly there is an appetite for consumer deposits and banks and fintechs alike are willing to compete for the business. Ultimately, this is good news for the US consumer as never before has there been so many options. The competitiveness leads to both lower (or no) fees and higher yields on banking products. It’s an interesting phenomena as some fees are driven down to zero and there is less differentiation from one product to the next. It’s similar to what we’ve seen in stock trading as the newcomers in the space brought transaction fees to zero and other big firms eventually have had to follow suit. But who will ultimately be the leaders of tomorrow?
The way banks make money today is changing and we’re starting to see a wave of change in consumer banking. Today, most of these deposit products are offering around a 2% APY after falling recently due to the rate cut. Still this beats some of the traditional banks which still get away with paying almost nothing on deposit accounts. It turns out that there is a segment of the population that are set in their ways, but for those willing to make a change these financial firms are collecting deposits online and offer a very quick on-boarding process. In my opinion if you’re a US consumer and earning less than 1% on your savings account you should strongly consider switching to the many reputable product offerings in the market today. Here are some of most recent entrants and unique offerings in this space, all of which offer FDIC insurance.
Santander
The Spanish bank recently announced that they are going to launch a new online deposit platform in the US. Set to launch in the next year, the offering will reportedly pay a higher rate than that of Wall Street banks. The goal for the bank is to access cheaper costs of funding.
Robinhood
Robinhood’s first attempt at a ‘savings account’ fell flat and after ten months they have announced their second attempt. Robinhood’s Cash Managment will pay 2.05% APY as of October 8th. The consumer friendly product has no fees and is currently accepting users via a waitlist. CNBC shares further details.
