Digital advice startup Betterment is launching checking accounts.
The firm is hoping to win over its more than 500,000 existing customers across retail, 401(k) and advisor services, as well as new users that it believes would welcome the opportunity to consolidate and track more of their finances under one roof.
Betterment Checking, insured by the FDIC, includes a contactless debit card, reimburses ATM and foreign transaction fees worldwide and allows the user to shift funds between Betterment banking and investing accounts. The feature went live on April 21.
Funds in the checking account are held by NBKC Bank in Kansas City, Missouri. Betterment Checking is complemented by its savings product, Cash Reserve, a cash account that debuted in July 2019 and yields 0.3%. The savings funds are held at a number of participating program banks and eligible for federal deposit insurance of up to $1 million.
“Betterment started as a new approach to long-term investing and achieving long-term goals, such as retirement or home purchases,” said Mike Reust, the company's chief technology officer. “We moved further into medium-term financial goals over time, then short-term, low-risk investing. With Cash Reserve and Betterment Checking, we’re going deeper into more immediate and day-to-day cash needs.”
The firm is pursuing millennial professionals and their families with its new checking account. Currently, two-thirds of its retail customers are millennials. Reust described this audience as cash-flow positive with medium-to-high income. In his assessment, this segment cares more about avoiding fees than accessing their paychecks early (as lower-income consumers might) and is comfortable banking digitally.
The account lacks features that are common among other checking products, such as remote check deposit. Other features in the works include joint checking accounts, physical checkbooks, a simplified presentation of transaction information and the ability to easily switch over accounts for direct deposit.
“It’s tricky to decide when this is complete enough for generally available release,” Reust said. “Given feedback that we were seeing through beta, we felt we had a complete enough product to attract customers.”
One component that was important for them to get right before public release was the ability to transfer money between Betterment’s bank and investment accounts, said Reust. The company has sensed less demand for remote check deposit.
Vanguard reclaimed its top spot in J.D. Power’s annual ranking of self-directed investor satisfaction. Charles Schwab retained its position as a leader among DIY investors.
Customers holding both a checking and Cash Reserve account can let Betterment monitor their balances and automatically move funds back and forth between accounts. They can also customize this feature to dictate how much money they want Betterment to stash in the checking account at all times.
Meanwhile, for its investing customers, Betterment has taken a few measures to assuage customer anxiety during the coronavirus pandemic, including posting short videos about interest rate drops and market volatility hosted by the company’s director of behavioral finance and investing. It also broadcast a public web seminar over Zoom where attendees could hear from Betterment’s certified financial planners and head of investing.
