With the new feature, users can earn interest on money they’re not investing with Robinhood.
The account is insured by the FDIC. Robinhood has partnered with six banks – Goldman Sachs, HSBC, Wells Fargo, Citibank, US Bank, and Bank of Baroda – to get FDIC insurance for the deposits held in Cash Management accounts.
Not having the appropriate insurance was what failed Robinhood’s first attempt to launch a similar service last year, after the SIPC explained that the new offering may not fall under its regulatory oversight and consumer money would therefore not be protected.
Over time, Robinhood is aiming to add more PFM features.
Goldman Sachs’ Marcus recently further lowered its interest rate to 1.9%, after initially offering 2.25%. Hence, Robinhood’s new product will rank among those with the most attractive rates in the country, but to ensure uptake it should also focus on successfully publicizing it to consumers.
The launch could help Robinhood get more consumers to invest with its app, while also increasing trust in the company.
If users hold their savings with Robinhood, they’ll be more likely to seek out the company’s investment options.