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Robinhood (HOOD) CEO Vlad Tenev has called out Big Banks, stating US customers are getting "ripped off" by low-yield savings accounts. In turn, Robinhood will be applying a 5% annual percentage yield (APY) on uninvested cash in Robinhood Gold subscribers' accounts.
Yahoo Finance's Josh Schafer, Pras Subramanian, and Alexandra Canal examine the new adjustment to Robinhood's cash sweep program and dissect Tenev's recent comments on the banks.
Editor's note: An earlier version of this segment referred to Robinhood Gold's cash sweep program as a savings account. We regret the error.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
This post was written by Luke Carberry Mogan.
Video Transcript
ALEXANDRA CANAL: Switching gears here.
Yesterday, we inaccurately categorized a change to Robin Hood's gold product.
As of yesterday, Robin Hood gold customers can now earn a 5% annual percentage yield on their uninvested cash in their account.
This money will not be in a separate savings account.
So you know, this is something that Robin Hood recently rolled out.
Their stock has been a bit under pressure.
They're looking to bring more consumers to the platform.
With interest rates top of mind right now, this is what every consumer is thinking about.
This could be something that maybe they leverage.
JOSH SCHAFER: Oh yeah it's an advantageous move for customers of Robin Hood, right, to be able to get 5%.
You want to be able to get 5% on uninvested cash, right?
That's something that you can get through different means and different ways.
Now you don't have to go try and get a Treasury direct account, Pras, and buy a bond.
You can just have some uninvested cash, get 5%.
Seems like a good play for customers of Robin Hood to be able to just take advantage of that.
PRAS SUBRAMANIAN: It's funny that you have to be part of this subscription product-- ALEXANDRA CANAL: Right, it's status.
PRAS SUBRAMANIAN: --as opposed to just getting the money in your uninvested cash.
I do got to say though, Vlad was saying that banks are, kind of, ripping people off with their low accounts-- yielding accounts.
ALEXANDRA CANAL: Well, the average is around 0.6%.
PRAS SUBRAMANIAN: So he wants to, sort of, give you a little bit back more, get some of those younger investors, those younger people who are trying to get into finance, get them on the Robin Hood platform.
And maybe this is a way to do that.
JOSH SCHAFER: Yeah, I mean, it was a fair reminder, I thought, to just generally, if you were to use an overall savings account at a bank, like, one of the big banks.