Robinhood made waves early last week when it announced that it would start offering checking and savings accounts with a 3% interest rate. That would have given consumer a different option from traditional banks, with an amazing rate to go with it.
There was some doubt whether the deposit accounts would be insured. They certainly weren’t FDIC insured but Robinhood stated in its blog post that they would be covered by SIPC which deals with brokerage accounts. That turned out to be false because the checking and savings that Robinhood would offer were described as traditional deposit accounts, and investing wasn’t required. Robinhood didn’t touch base with SIPC before the announcement, a surprising misstep for a company with millions of customers.
Now Robinhood has backtracked and deleted the original blog post about the new checking and savings accounts. A new announcement now calls the new account a ‘cash management program’ that will be lunching in 2019. It says that they “realize the announcement may have caused some confusion” and they “plan to work closely with regulators” as they work to launch the new cash management program.
There will definitely be changes to the structure of the account in order for it to be covered by SIPC. With no insurance, nobody in their right mind would deposit large amounts in an app, regardless of the interest rate. They definitely jumped the gun on this, without going through the proper steps.