Robinhood, the FinTech that garnered a lot of attention last week after announcing a checking and savings product with 3 percent interest, has retreated from that, removing any mention of checking and savings from the product.
According to a report in Bloomberg, when Robinhood announced the products last week, it compared them to traditional bank accounts, boasting a 3 percent interest rate on both checking and savings. That marketing material was removed from the page over the weekend, as were tweets promoting it at the launch — the FinTech is now calling the offering a cash management service, reported Bloomberg. “We’re excited and humbled by the response to yesterday’s announcement of Robinhood’s cash management program launching in 2019,” founders Baiju Bhatt and Vlad Tenev wrote in a statement, according to Bloomberg. “However, we realize the announcement may have caused some confusion.” The executives told Bloomberg they are working with regulators and are in the process of overhauling the marketing material related to it.
Shortly after Robinhood launched the products, questions arose about how the money would be insured and if it would be protected like a bank account that has the backing of the Federal Deposit Insurance Corp. Robinhood’s new products aren’t insured by the FDIC but do have the protection of the Securities Investor Protection Corp. Bloomberg reported the SIPC said Robinhood never contacted it before the launch, with the president and chief executive Stephen Harbeck implying to Bloomberg that it may not insure it. “I disagree with the statement that these funds are protected by SIPC,” Harbeck told Bloomberg late last week. “Had they called us, I would have told them what I just told you in that I have serious concerns about this. This has gigantic ramifications for the banking industry.”
When announcing the new products last week, Robinhood said its checking and savings product is a departure from traditional accounts because they pay the high interest rate and have no hidden fees associated with them. “We believe you should earn more on your money, and shouldn’t be charged fees to access it,” Robinhood said in its blog post at the time.