Stock trading app Robinhood is moving into banking, launching current accounts and offering savers a market-leading three percent interest rate return on their cash.
The firm is inviting customers to sign up for its upcoming 'Checking & Savings' account with a promise to start shipping its first debit cards - issued by Sutton Bank - in January.
The firm says the cards will be accepted at over 75,000 ATMs across the country, with locations in major stores like Target, Walgreens, or 7-Eleven. An accompanying app will enable customers to find the closest ATM, pay bills, deposit or mail cheques, and chat with customer support 24/7.
What's more Robinhood Checking & Savings has no minimum balance, no monthly fees, no overdraft fees, and no foreign transaction fees. The firm intends to split revenue from debit card transactions with Mastercard an earn a higher return on customer assets by investing in US Treasuries.
"Currently, traditional checking and savings accounts cost more for people who make less, are riddled with unfair and hidden fees, and earn you minimal returns on your savings," says co-CEO Baiju Bhatt. "We believe you should earn more on your money, and shouldn’t be charged fees to access it."
The company's free stock-trading model currently claims six million users and a $5.6 billion valuation in its five-year existence. The three percent interest rate beats current market leader, Marcus from Goldman Sachs, by a full percentage point.
Checking & Savings is not a bank account per se, but instead consists of separate balances held within a Robinhood brokerage account. That means funds are not FDIC-insurance, but instead protected by insurance to the tune of $250,000 from the Securities Investor Protection Corporation, or SIPC.
However, there may be trouble brewing between the startup and the regulator:
News of Robinhood's incursion into core banking territory arrives on the same day that European trading and money transfer firm Revolut announced that it had gone one step further by securing an actual banking licence in Lithuania, enabling it to passport a new suite of banking services across the Union.