As competition among digital banks intensifies, US fintech Current is introducing a new product designed to make its banking service more attractive. The company announced this morning that it is launching a new high-yield offering called “Interest,” which will allow any checking account holder to earn a 4.00% annual percentage rate (APY) — a rate 60x higher than the national average, it notes.

The interest offer will be made available to all current users, including those on Current’s free Basic plan and Premium users who pay to access enhanced features. (The latter group is also likely to help Current afford to increase its APY, as Premium subscribers pay $4.99 per month for Current’s comprehensive service.)

While it is common for neobanks to offer a higher APY than traditional banks, many banking services require users to jump through hoops to reach the higher rate. For example, One Finance offers a 1.00% APY in its “Save” product on funds up to $5,000, but to get the higher rate of 3.00%, you need to set up the auto-saving feature. Aspiration and Varo also offer a 3.00% APY, but have their own requirements regarding expenses, balances, total direct deposits, and more.

Current’s new offering, however, pays out up to a total of $6,000 per year, the company says. It also notes that there is no minimum balance required and no direct deposit or spending requirement. However, what makes the product different is that all members can earn interest on their money on a daily basis. (Normally, banks pay the interest monthly.)

In addition, the advantage of Current’s product is that the total of $6,000 must be spread across its Savings Pods. So the APY is earned at a maximum of $2,000 per pod. That makes it more of a viable choice for customers who are just starting to save and want to organize their money into different groups, rather than someone who wants to park a larger balance. (Free users can also only create one Savings Pod, while subscription users can create three.)

Image Credits: Current

Current tells TechCrunch it’s not introducing this high-yield product at a faster pace, which it aims to reduce later, over time.

“We don’t approach this as a promotional rate,” explains current VP of Product, Josh Stephens. “We’re approaching it as something that will be available to everyone in the near future… I think you definitely see promotional rates from other people with a lot of bells and whistles attached to it. But this is something that’s available to everyone, with no minimum balance, at no cost,” he says.

The company also sees the rate as a way to better promote its banking services in a crowded landscape. Current, which started as a banking service for teens, expanded over the years to offer a more competitive product for adults, including those without children. Like many other digital banking services, Current offers benefits such as free overdraft, cashback, free ATMs, faster direct deposits, automatic savings, money management tools and more. With the launch of Interest, it now also meets customer demand for better savings products.

“Inflation has risen in recent months at one of the highest rates in 40 years. [The Consumer Price Index] has grown at the fastest rate since the early 1980s,” says Stephens. “And for our members—and for many Americans—it meant their money didn’t go as far as they needed. That means they pay more for the same goods and services. It makes it harder to put money aside.”

Meanwhile, Current believes that the existing options in the market make it difficult for banking customers to grow their money in a meaningful way.

The change could encourage some bank customers who have parked their money elsewhere in savings to switch to Current’s service instead. Over time, they can upgrade to premium Current products and services, making the higher APY worth it from a business perspective.

Today, Current has over 3 million members, free and paid, with an average age of 27 among its member base – younger than many competitors.

In the longer term, the company plans to roll out more offerings to help these customers grow their money further. It plans to enter the crypto space after announcing a partnership with Acala last year to create a new category of “hybrid finance” that will combine the benefits of traditional banking and decentralized finance. Consumer credit is also on the roadmap.

Current’s new Interest product is rolling out today for iOS and Android.

TechCrunch asked NerdWallet’s banking specialist Chanelle Bessette for thoughts on the new offering.

“Current chooses the path of offering a much higher than average interest rate, but there are obligations involved. Consumers can earn 4% on up to $2,000 for three different “Savings Pod” sub-accounts, meaning they can earn up to $240 in interest per year if they meet all balance ceilings,” Bessette said. keeping with the $4.99 monthly fee for the Premium account that lets you add those extra savings pods, this fee comes out to almost $60 a year, so to get the fee-versus-interest math to work you earn more interest than you pay in fees. Usually we don’t recommend accounts with monthly fees, but in the case of Current, it seems like consumers can cancel the fees and make quite a bit of extra money as long as they keep their account balance high,” they added.

Updated, 1/13/21 after publishing with NerdWallet Insights.

This post US fintech Current introduces high-yield savings with clients earning a 4.00% APY – TechCrunch

was original published at “https://techcrunch.com/2022/01/13/u-s-fintech-current-introduces-high-yield-savings-where-customers-earn-a-4-00-apy/”