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Robinhood grows high-yield deposits amid bank failures

Illustration of a manila folder with the Robinhood logo on it, with hundred-dollar bills inside.

Illustration: Brendan Lynch/Axios

Robinhood's high-yield subscription offering has been growing rapidly as customers turn away from stock and crypto trading, CEO Vlad Tenev said during the Bernstein Strategic Decisions Conference on Friday.

Why it matters: Passing higher interest rates along to customers is becoming the new customer acquisition and retention strategy for fintech companies as marketing budgets shrink.

Details: For instance, Robinhood offers Gold, a subscription that gives users 4.65% yield on cash and $2 million in FDIC insurance, among other benefits.

  • Amid the string of recent mid-size bank failures, the program has added about $1 billion in deposits per month, bringing it to $10 billion in total deposits.
  • At the end of the first quarter, that figure was $8 billion.

What they're saying: "Banks are not passing along that much yield to their customers," Tenev said Friday. "In that environment, offering high yield with sort of this large amount of FDIC insurance beyond what you can get at a bank has been really attractive."

Of note: This all comes amid broader pressure on fintechs to diversify their businesses and cross-sell to existing users. Robinhood notably has seen a declining number of monthly active users amid a slowdown in stock trading.

  • Last quarter, revenue it earned from deposits sitting in accounts actually eclipsed its transaction revenue ā€” the business line it's best known for.
  • Last year, Robinhood also launched a retirement account.

The big picture: Consumers flock to well-known brands in times of uncertainty. But fintechs like Robinhood, SoFi, Holdings and Meow seek to take advantage of the current bank turmoil and rising interest rates to expand their user bases.

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