I wrote a few days ago about a new savings account option from Betterment that offers 2.69% APY. That’s the best rate for a high yield savings account. But there’s some concern as Betterment, a digital wealth-management start-up, might have similar issues to Robinhood, when they first attempted to launch traditional bank accounts.
Regulators have asked online wealth advisor Betterment to clarify some details surrounding its new checking and savings accounts just hours after they were launched. While the content of questions from the Financial Industry Regulatory Authority, or FINRA, is unclear, Betterment had been in contact with the agency, as well as the Securities and Exchange Commission, in the month ahead of Tuesday’s launch, CNBC reports.
This highlights the complexity and uncharted territory of launching new bank-like products in a highly regulated industry. Betterment has to partner with banks that actually hold customers’ deposits and have FDIC-insurance. Customers’ deposits for Betterment will be held at Citi, Barclays and Valley National. The checking-like accounts are insured up to $250,000 by the FDIC, while savings accounts are insured up to $1 million. It’s not clear if there will be any issues due to the Financial Industry Regulatory Authority inquiry.
Others fintech companies have launched similar products recently. Wealthfront launched a cash account that has attracted $1 billion in deposits after offering the best available rate at 2.57% APY. That was until Betterment entered the game. Fintech start-ups SoFi and Acorns have debit-like accounts, too. Robinhood is also planning to relaunch its banking products.