I assume they're trying to break the inertia people have with major banks. There's no reason to change bank unless there's some substantial incentive like favorable interest rate to offset the hassle involved. I'm not sure there's an ulterior motive here other than customer acquisition.
Agreed, they are trying to buy customers, if it turns out that they can't convert these customers into traders they will lower the rate to a breakeven amount and not care if they lose those accounts.
Perhaps true, there's been an opening for a 'cool' millennial-oriented financial institution for a while now, so perhaps fewer customers will drop off than expected.
... I can't remember but there was one I used at some time that was like that. Had a weird spirograph logo and a cardboard motif on their site. There were a few others.
Which should tell you a lot. I've been through the "Millennial Bank" wringer.
Honestly, checking accounts are all the same. Especially because I use a credit card paid in full every month. It's a holding pool till next month's CC bill is due. Until the US treats debit cards with the same protections as credit, I won't let my debit card near a gas pump or wander off with a waiter or be used online.
I don't know that there's an opening really. That so-called opening keeps popping up since like 2005 and gets "filled" by a SV-backed MVNO-For-Banking and it's just........a checking account provided by some.other actual bank repackaged with a (nice) angular front end and on the AllPoint ATM network with crappy chat customer support.
Simple bank. They’re based out of portland. I use them. They’re pretty good and have great support. Also $1 out of country withdrawal fee which is nice.
Seems like a weak market to go after, given that people likely to respond to a "cool" financial services brand may be a poorer demographic that maybe doesn't have any prior experience with "legacy" financial services providers. So just because they create accounts @3% doesn't mean they'll also open trading accounts.
> So just because they create accounts @3% doesn't mean they'll also open trading accounts.
From the Robinhood website fine print “Robinhood Checking and Savings is an added feature to existing Robinhood accounts and is not a separate account or a bank account.”
So, yes, opening a Robinhood Checking & Savings account does mean that they will open a trading account, because they aren't actually different accounts. (And it's a waitlisted feature where you get moved up the waitlisted by referring others to RobinHood, so it's a clear way of getting the overall service in front of more users.)
Millennials may not have money now, but they'll accumulate more wealth as they get older. If you can convert them now, the friction to changing again is high enough that you'll probably still have them when they're worth something.
That's a good point. A friend of mine in medical school told me that banks are itching to give loans to broke med school students because they know building the relationship now is going to pay dividends when the now-broke student becomes a doctor looking to buy a new car or new house.
Yep that's a good play, but their page says that the 3% can change depending on the market. So if that percent changes a few months after you create an account, I would bet many people would leave cause of the bait and switch.
> Seems like a weak market to go after, given that people likely to respond to a "cool" financial services brand may be a poorer demographic that maybe doesn't have any prior experience with "legacy" financial services providers.
Yeah but people do grow up. And I don't know about you, but I've got some super long term relationships with some banks. They are in it for the long game.
Huh. I don't have much of a problem going in to a bank branch, given that there's one every half mile. A quick in-person meeting is fine compared to the shitstorm of unusable menus and nearly unintelligible communication that is calling your bank on a cell phone.
(I mean it would be great if there were a bank that did all its customer service over text chat, but that's too much to ask for, right?)
I'd prefer a usable website in addition to guarantees of prudence in investing the money. My $ for both. If Robinhood replaced SIPC with something as credible, I'd go for it. They could probably do it with US Treasuries and bonds from Google, Apple, Facebook, etc.
Judging by their recent activity, Simple won't respond well at all. They've been in a downward spiral for the past few years post-acquisition by BBVA. All the original founders have left amidst a revolving door of executives, and the company has struggled to launch new products and innovate beyond their initial budget features.
Right, but that incentive is only substantial if you’re going to park a lot of money there, which is exactly the sort of customer they don’t want according to the comment I replied to.
I'll move my ~$100K emergency fund into there just to get free money. And move it out somewhere else when the rates change. Over the years I've moved accounts between Dollar Savings, Emigrant, Orange, Ally, and probably 2 or 3 others...
I would have to read up on the transfer times. If it's reasonably standard (2-3 days) and doesn't have any daily limits, then yes. It's a US company, FINRA approved, SIPC insured, so the risk is minimal.
Not to make you feel bad, but at $150k/year salary (average in SV) one should be able to save $100k within 5 years, with little impact on quality of life.
They may be playing this on two sides: the more obvious one which is acquiring customers to feed their trading business, and simply trying to evolve into a financial institution, which should bolster their valuation in their inevitable IPO in 2019 or 2020. Their backers might be content to burn money for a year or so to get a larger multiplier at some point in the future.
