Digital bank Green Dot is launching a savings account with a 3% annual yield rate. The company says the new product, which includes unlimited 3% cash back on online and in-app purchases for its debit card, will open them up to a wider customer demographic, including people who may already have an account with another financial institution.
Green Dot has mainly eyed the unbanked or underbanked since entering the banking space in 2011.
"This is a product evolution for our historical customer segment," Michael Keeslar, Green Dot's general manager of consumer products, told Banking Dive. "What we're trying to do, quite candidly, with the new product, is to grow our addressable market, and speak to new types of customers who maybe haven't considered Green Dot in the past."
The 3% yield on savings of up to $10,000 puts it at the top of the high-yield savings account market, a rate that makes it 30 times the national average of 0.1%, according to Bankrate.com.
"The 3%, that's the status quo for us. That's not a promotional offer," Keeslar said. "And we expect that to be current for the long haul."
Green Dot isn't the only nontraditional bank to launch a high-yield account this year. Wealth adviser company Betterment announced last week it plans to offer a promotional 2.69% yield for the rest of the year, before dropping to 2.43% in 2020. Wealthfront launched its 2.57% interest savings account in March. The companies' deposits are held by partner banks, where they earn interest and are federally insured.
Keeslar said Green Dot's vertically integrated approach sets it apart from competitors.
"Everything that's required to run this program, we do in-house, and that differentiates us from some of the neo-banks who need to go out and find bank sponsors," he said.
Green Dot benefits from a brick-and-mortar presence; national retail chains including Walmart, 7-Eleven, and Kroger sell and reload the company's prepaid cards.
But because the Pasadena, California-based bank doesn't face the same overhead associated with storefront banks, the savings account's high-yield model is sustainable, Keeslar said.
Several banks have lowered interest rates on their own high-yield savings accounts ahead of Wednesday's expected Federal Reserve rate drop.
Goldman Sachs' consumer arm Marcus cut interest rates from 2.25% to 2.15% in June, and Ally Bank also lowered rates to 2.1% from 2.2% ahead of the Fed decision, according to CNBC.
A 25 basis-point drop won't affect Green Dot's profits from the new savings product, founder and CEO Steve Streit told CNBC.
"If rates were lowered precipitously quarter after quarter, we may have to look at it," Streit said. "But there's certainly nothing in the near term that we're worried about."
