The recent developments in the financial industry, specifically in the realm of high-yield savings accounts. In the past few months, regional banks have faced significant challenges due to concerns about unrealized balance sheet losses. This has caused a deposit drain at many of those banks, with median deposits declining at both regional and mid-sized banks. As a result, some bank customers have become skittish about depositing money in the U.S. banking system.
In this context, tech-oriented firms have started to offer non-traditional alternatives to stash cash and potentially earn a lot of money doing it. Apple recently launched a high-yield savings account, which allows Apple Card users to store their daily cash rewards in a Goldman Sachs savings account offering an annual percentage rate of 4.15%, more than 10 times the national average. Anticipation for Apple's product had been building since it was first announced in October 2022. Within the first four days of launch, the account attracted almost $1 billion in deposits, with $400 million in its first day.
Robinhood, an online discount brokerage, also recently unveiled a high-rate savings product. Robinhood "Gold" members paying a monthly fee of $5 will qualify for the account, while non-Robinhood subscribers can earn 1.5% for uninvested brokerage cash. The interest rates Apple and Robinhood currently offer vastly exceed those found at most traditional banks, where U.S. savings deposit accounts yielded an average of just 0.39% in April, according to Federal Deposit Insurance Corporation (FDIC) data.
While some depositors may worry that nascent app accounts won't provide the same regulatory deposit protection as FDIC-insured bank accounts, that's not the case for Apple's savings account. Because Goldman Sachs services Apple's accounts, deposits up to $250,000 on those accounts qualify for FDIC protection, just as they do at brick-and-mortar banks. Similarly, Robinhood uses a so-called "sweep account" to shift its brokerage account cash into a network of FDIC-insured banks.
Apple's success in the finance market has been impressive, despite the fact that Apple is not a bank and relies on Goldman Sachs for that service. However, Apple's brand loyalty and consumer confidence have proven to be unmatched. In addition to the savings account, Apple has also launched Apple Pay, Apple Cash, and Apple Card, as well as its Apple Pay Later feature, which provides loans through its Apple Financing, LLC subsidiary. By traditional standards, Apple is not a bank, but it's starting to look like one.
Overall, the article highlights the shifting landscape of the financial industry, with tech-oriented firms offering increasingly attractive rates for consumers, while traditional banks struggle to maintain customer confidence amid recent challenges.
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