Robinhood Markets has finally launched its take on a bank account, albeit a very different version of the service it once hoped to offer. On Wednesday, the online brokerage firm rolled out Cash Management to a subset of users. The product will sweep the money customers don’t currently have in stocks into a separate account with 1.8% interest.
The introduction comes after a debacle for the company last year, when Robinhood, known for popularizing free stock trading, announced a product called Checking & Savings that drew
The product is part of a larger effort at Robinhood to broaden its business model. “Our entire business was built knowing we weren’t going to be charging trading commissions,” said Co-CEO Vlad Tenev. “We’ll still have existing revenue streams, and in addition we’ll add revenue from interchange on debit card transactions. As we launch even more products covering even more needs of customers, that revenue stream will continue to diversify.”
Cash Management will offer bank-like services — including debit cards and FDIC coverage on deposits — through a partnership with an existing bank, unlike Checking & Savings, which did not have such a partnership. The product represents a scaling back of banking ambitions for the startup, which had originally planned to become a bank itself. But last month, the company withdrew its application for a national banking charter. Being granted such a license would have allowed the company to offer checking accounts, debit cards and similar services on its own. No fintech startup has so far successfully won a charter.
The debut of Cash Management comes after several other financial technology startups have rolled out their own banking services, leading to an increasingly crowded field. Betterment and Wealthfront also have their own versions of cash management services, as do more traditional competitors like Charles Schwab.
At the same time, Robinhood’s main business of free stock trading is also seeing more competition. Over the last several months, Charles Schwab, E-Trade Financial and TD Ameritrade all eliminated trading fees for U.S. stocks, ETFs and options.
