Tech Startups Are Trying to Make Bank Accounts Cool
(Bloomberg) -- Suddenly, a common, simple, and frankly boring product is all the rage in Silicon Valley: bank accounts.
In recent months, a slew of startups have been launching products bringing them closer to becoming banks themselves. In January, Social Finance Inc. debuted SoFi Money, a hybrid between a checking and savings account. Then in April, micro-investing platform Stash announced a service that will allow users to open bank accounts with no overdraft fees. Up next might be Wealthfront Inc., which is doing research to see if it wants to get in on the game as well.
This week, the Redwood City, California-based startup sent out a survey to customers gauging interest in a cash account with an interest rate similar to a savings account and features including direct deposit, a virtual card and the ability to instantly move cash between Wealthfront accounts.
“We always send out email surveys on products we’re evaluating or considering,” Wealthfront spokeswoman Kate Wauck wrote in an email. “That’s one of many.”
Part of the reason so many startups are moving toward bank accounts is that it can lock in a customer relationship, said Matt Harris, managing director at Bain Capital Ventures. “Most of these companies started as single-product companies, and need a second act."
Startups aren’t the only ones starting to move into traditional banking services. More established tech and finance firms are also entertaining the idea. PayPal Holdings Corp. has sent out similar surveys, trying to find out if customers would be interested in adding other products, like savings accounts, to their digital wallets. Goldman Sachs Group Inc. has made a push into consumer banking through its Marcus arm, which started out as a lender but has since expanded into savings accounts and recently bought personal finance startup Clarity Money.
Another draw is that it’s become much easier to launch these types of products over the years, for incumbents and startups alike. Because banking licenses are difficult to obtain, Social Finance is working with WSFS Financial Corp. on its checking account offerings, and Stash has partnered with card provider Green Dot Corp. on its no-overdraft accounts. “Companies like StoneCastle and Green Dot are making it much more lucrative, quicker and more flexible to build these products,” Harris said.
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