Newly launched high-yield savings account of Apple has reportedly attracted deposits of nearly $1 billion within the first four days of its launch, according to two sources familiar with the matter. On its launch day, the savings account drew almost $400 million in deposits. The account’s 4.15% annual return and the widespread usage of iPhones are believed to be the main driving factors for the high number of account openings, particularly when compared to the average bank’s interest rate of less than 0.5%.
One source mentioned that around 240,000 accounts had been opened by the end of the launch week. The savings account is offered through a partnership with Goldman Sachs Bank USA. While Goldman Sachs’ own high-yield savings account, Marcus, provides a 3.90% return, it is notably lower than the rate offered by the Apple product. Apple and Goldman Sachs declined to comment on the deposit and account figures.
“Banks have quickly responded to the Fed’s interest rate hikes with higher mortgage and car loan rates, but savers have seen little to no increase in traditional bank deposits or savings accounts,” Richard Crone, CEO and founder of payments firm Crone Consulting, claimed. “There’s an outflow to CDs, money market funds, and fintechs like Apple.”
First Republic Bank’s failure amidst competition from the savings account of Apple
Apple’s new savings account is entering a highly competitive market as financial institutions struggle to attract and retain deposits, especially after bank failures. The latest bank to fail due to a lack of confidence in the industry is First Republic Bank, and its assets, including $92 billion in deposits, have been acquired by JPMorgan Chase.
First Republic’s stock has fallen by 97% this year after revealing that it lost $100 billion in deposits during last month’s panic. The bank’s total deposits stood at $104.5 billion at the end of the first quarter, a significant decrease from the previous quarter’s $176.4 billion. The first quarter figures included emergency funding of $30 billion deposited by larger banks, such as JPMorgan Chase and Bank of America, at First Republic.
Despite the significant deposit outflows that led to First Republic Bank’s failure, Goldman Sachs is attracting many consumer funds by leveraging Apple’s massive customer base of 2 billion iPhone owners. However, the new high-yield savings account is exclusively available to Apple Card holders. Customers can easily open a savings account directly from their iPhone, taking less than a minute to complete. Furthermore, the Apple Card’s daily cash rewards from spending are automatically deposited into the high-yield savings account.
Competition and Inertia in the Financial Services Industry
Customers can easily track their savings account balance and the interest earned through a dashboard integrated with Apple’s digital wallet. Previously, the daily cash rewards from the Apple Card were automatically deposited into Apple Cash, a prepaid digital card issued by Green Dot Bank and held in the iPhone’s digital wallet. According to Crone Consulting, approximately $3.8 billion is deposited annually into Apple Cash from the Apple Card, and these funds will now be redirected into the new high-yield savings account. It’s worth noting that the Apple High Yield Savings account is subject to the $250,000 FDIC insurance limit.
Following the Federal Reserve’s significant interest rate hikes, many traditional regional banks need help maintaining net interest margins. As a result, only some banks have been able to offer rates that match Apple’s impressive 4.15% rate on FDIC-insured savings accounts. However, several digital banks have been able to offer even higher yields, with Bask Bank, a division of Texas Capital Bank, currently offering a savings account with an annual rate of 4.75%.
Fintech companies like Current, Varo, and LendingClub also offer high-yield products with annual returns ranging from 2% to 4.25%. Despite the competition, Apple and Goldman Sachs may have an advantage due to their seamless user experience and iPhone integration, which can be a powerful force in the financial services industry, especially in banking.
