Dive Brief:
- Automated wealth management fintech Wealthfront extended its partnership with digital bank and banking-as-a-service provider Green Dot, the companies announced on Monday.
- The two companies first partnered in 2020 to launch Wealthfront’s cash account, which includes features such as early direct deposit and bill pay.
- The partnership extension comes as Wealthfront recently increased the annual percentage yield (APY) on its cash account from 3.3% to 3.8%, a move the firm says tracks with its efforts to pass a large portion of every federal funds rate increase to customers.
Dive Insight:
“Today’s investors want smart saving and investing products that help them build wealth in all market conditions, which is why we’re proud to offer the Cash Account to help our clients earn more on their uninvested savings,” Dave Myszewski, VP of product at Wealthfront, said in a statement. “With one of the highest rates on the market plus checking features powered by Green Dot, we’re able to provide a best-in-class Cash Account that is far superior to what a traditional bank can offer, so our clients can grow their long-term wealth easily and conveniently.”
The average age of a Wealthfront customer is 37 and 70% of the fintech’s clients are under 40 years old, according to the company. The fintech said the average Wealthfront cash account holds about $30,000.
Wealthfront’s new APY comes as the national average savings yield is 0.19%, according to Bankrate.
Elly Stolnitz, a Wealthfront spokesperson, said the firm has sought to offer its customers high rates since the account’s inception in 2019.
“Other institutions are able to pay a high rate like Wealthfront’s, they just don’t,” she said.
Wealthfront’s APY increase follows a similar raise by fellow fintech Upgrade, which in October launched a new high-yield savings account offering a 3.5% APY to consumers who maintain a minimum balance of $1,000.
Upgrade and Wealthfront’s moves to raise the percentage yield on their accounts come amid tremendous competition among fintechs in the high-yield savings space.
Most traditional institutions, however, have not responded with similar raises, Ted Rossman, a senior industry analyst at Bankrate.com told Banking Dive last month.
“They have all the deposits they need,” he said.
Wealthfront goes it alone
Wealthfront’s partnership extension with Green Dot, as well as its latest high-yield push, comes as the fintech forges ahead as a standalone company, following the disintegration of a planned $1.4 billion acquisition by UBS, which was announced in January.
The merger agreement was called off in September, and the Swiss banking giant instead gave Wealthfront $69.7 million in financing.
The companies are “continuing to explore ways to work together in a partnership,” the robo-adviser’s CEO, David Fortunato, wrote in a blog post in September.
A Wealthfront spokesperson declined to share additional details related to the terminated deal, but said the company is excited about its path forward as an independent company and is “focused on building a lasting company that positively impacts the lives of our clients for decades to come.”
