Why Robinhood had to backtrack on the checking and savings accounts with 3%
If you didn’t know, Robinhood started offering checking and savings accounts on December 13. Not just that. These accounts come with a 3% interest rate which is like 30 times more than the national average. To be quite honest, this sounds pretty good.
Robinhood have grown so fast in the last 5 years with his stock-trading app that offer trading with no fee. And they plan to keep offering new services like the checking and savings accounts with no fee plus that amazing 3% interest rate. Who doesn’t want to sign up with them?
The only problem is that the way the branded and presented this new service seems to be a little misleading. Wallstreet and the federal officials raise concerns about how Robinhood came up with these products just one day after the launch. Something important is that the company never communicate to the Securities Investor Protection Corps (SIPC) to discuss about the launching of this program.
Why not calling the SIPC is important? Let’s start for explaining something. Checking and Savings accounts are FDIC insured. Meaning that depositors will have a standard insurance for an amount of $250,000 per depositor, per insured bank, for each account ownership category. This insurance doesn’t cover other financial products such as stocks, bonds, mutual funds, life insurance policies, annuities or securities.
SIPC on the other hand protects the loss of cash and securities such as stocks and bonds, held by institutions that are SIPC insured. Even though Robinhood is SIPC insured, the kind of product they intend to offer as checking and savings seems it may not qualify to be SIPC insured. So, in case Robinhood fails there will be no way that depositors recover their money.
That’s why Robinhood decided it have to backtrack on the way they branded these accounts. They even post this article in his blog Click Here
In my personal opinion I believe is important to gain more customers but is more important to be transparent and clear about your products and services.
