Wealthfront recently announced it would provide customers with the ability to direct deposit funds and pay bills. Wealthfront is a large robo advisor wealth management firm. They recently announced a move into robo advisory of mortgages. While Wealthfront is not a bank, it is a brokerage and thus is able to take in customer deposits, although not FDIC insured (they are SIPC insured). Its latest announcement is an attempt to do away with checking and savings accounts, allowing customers to deposit money and pay bills from their brokerage cash account.
“With what we're doing, you no longer need a checking and a savings account. You have just one account,” Andy Rachleff, CEO of Wealthfront, said in an interview with American Banker. “There's no reason for two accounts — other than regulatory restrictions.”
Wealthfront will use AI to ensure customer bills are paid, emergency funds are topped off, and any remaining funds are directed into their brokerage account. Its Rachleff's vision of “self-driving money.”
If Wealthfront is not a bank and doesn't offer a checking or savings account, how are they pulling this off? It's the same playbook many fintechs are turning to for taking in more customer deposits and expanding into banking services — teaming up with a bank. Fintechs that offer banking services must register for a license with each state they operate in. While there are some regulatory hurdles to obtaining a license, it is far easier than trying to become a traditional bank.
Wealthfront is partnering with Green Dot, which is a banking-as-a-service platform and part of Green Dot Bank. By utilizing Green Dot, Wealthfront will provide customers with a debit card, which allows them to direct deposit and pay bills. Wealthfront's customers will also be able to take advantage of a 2.5% APY on their cash, basically turning their cash account into a high-yield checking account.
As banks swallow up fintechs through acquisitions and partnerships to enhance their consumer experience, fintechs are also utilizing banks to broaden their consumer financial product offerings.