Robinhood Customers Shift to High-Yield Deposits Amid Banking Turmoil


Robinhood Markets says its customers are switching to high-yield deposits amid recent banking sector turmoil.

Speaking Friday (June 2) at the Bernstein Strategic Decisions Conference, Robinhood CEO Vlad Tenev said total deposits into the company’s Gold Sweep program had surpassed $10 billion, “so it’s kind of continued to increase even since our last earnings result.”

That increase is happening as “banks are not passing along that much yield to their customers,” added Tenev, whose comments were reported by Seeking Alpha.

The company had addressed the banking turmoil during its April earnings call, when Chief Financial Officer Jason Warnick sought to reassure investors: “We are not a bank, we keep our assets liquid.”

And company executives repeatedly stressed during the call that Robinhood was critically focused on launching and providing products that put customer safety at the forefront.

“We’ve been a safety-first company for a long time, it’s our top company value,” Warnick said.

As PYMNTS reported, the platform’s net deposits annualized growth rate was 29% for the quarter, and 18% for the prior year. The earnings report showed Robinhood’s net interest revenue ($208 million) surpassing transaction-based revenue ($207 million) for the first time.

PYMNTS has noted the shift to alternatives to traditional banking in the wake of the banking crisis. For example, March saw the news that investors were rapidly moving assets into money market funds, putting $508 billion into such accounts during the first quarter of the year.

This shift brought the amount of assets in United States money market accounts to a record $5.2 trillion.

But even before the recent banking crisis, customers were pulling their savings from banks and chasing higher yields.

As PYMNTS wrote in February, this has opened an opportunity for digital-first financial institutions to reach out to consumers who may be newly considering, or have already jumped to, making a digital-first bank their primary financial institution. 

Tenev also said the company was seeing its Roth Individual Retirement Accounts (IRAs) “picking up a lot of traction” as “confidence in the social safety net goes down.”

That’s happening as paycheck-to-paycheck consumers – who make up 60% of the population – think retirement is out of reach, according to PYMNTS’ research.

“As some baby boomers and others getting ready to leave the workplace are unfortunately finding out, retirement is just a concept without the funds to back the lifestyle up,” PYMNTS wrote in March.

“Pensions in the U.S. are largely a thing of the past, and 401(k)s are having a rocky moment as the markets shift wildly in response to inflation, crypto scandals and bank meltdowns. And while Social Security seems solid for the time being, it was never meant to be more than supplemental income for retirees and should not be counted on for principal support.”