Should You Drop Your Traditional Bank for Amazon?
Amazon is expected to start offering a “checking-account-like product” for consumers who don’t already have bank accounts, the Wall Street Journal reported back in March. Other tech companies, like investing platform Stash and student loan refinancer SoFi, are also trying to get into the checking account game.
So, should you drop your traditional bank for a tech alternative?
The tech cos, naturally, are hoping you will, and not because checking accounts themselves are such lucrative products. For old-school banks, checking accounts were entry points for many customers. If you had a checking account, the thinking went, you’d be more likely to open a savings account, credit card, etc.—products that banks could actually make money on. That’s becoming less true than it used to be, as options proliferate and consumers become more savvy about financial products.
But tech companies know how to analyze and exploit your financial data in a way that banks haven’t yet done, according to Bankrate. They can use your data to tailor other product offerings to your financial habits. They’re hoping to be a one-stop shop for consumers.
They could also potentially offer lower fees and actual interest on a checking account. In fact, SoFi’s checking/savings account (currently in beta) offers 1.19 percent APY.
Not that they’re necessarily reinventing the wheel. As Bankrate notes, they’re partnering with small chartered banks to avoid regulatory headaches. “The banks get access to deposits that they can lend out and fintech startups get to become their customers’ primary financial provider,” writes Bankrate’s Amanda Dixon.
The products are likely best for those with uncomplicated finances. As always, watch out for fees—Acorns, another investing platform, charges $3 per month for its Spend product, for example—and consider what you’re getting out of the experience that you can’t get elsewhere, for free.