US fintech platform Save has partnered with online financial player Radius Bank to power an FDIC-insured checking account and debit card for the customers of its Savetech arm.
Radius will issue Save Debit Invest debit cards to consumers while the account will be managed as a first-of-its-kind tool on Save’s platform where it matches customers’ card signature spending dollar-for-dollar in the form of market-linked investments.
Under the agreement, over US$3 billion is anticipated in consumer transactions and investment matches within the first three years.
According to founder and chief executive officer Michael Nelskyla (pictured), Save is a platform where customers’ capital is never put at risk.
“We are a financial advisor and we've taken similar investments that you would see in a structured product world and we put those into an advisory wrapper,” he said.
In today’s low-yield world, Nelskyla describes the new player as a ‘compelling proposition’ for consumers.
“Our customers can entrust their money with us as we place their capital with a FDIC-insured bank in deposit. We then take the interest and we invest it in the markets based on the customer risk profile. We do that automatically and algorithmically,” he said.
For instance, a customer might want to invest $10,000. Save would take the $10,000 and invest the interest. However, an initial priority is validating what their risk profile is. However, with no downside, there is a limited amount of risk profiles: Save has three with which customers can identify with, and it will invest accordingly.
A client would be able to keep the yield on a matching investment that is projected to earn average returns of about three percent, greater than that of other savings vehicles, bank accounts or card products. The investments are under the eye of Save’s algorithmic technology that uses a portfolio of exchange-traded funds (ETFs).
The platform features a portfolio of 30 ETFs which contains typical asset classes such as stocks, bonds or commodities. For example, should a customer have the riskiest profile, they would receive a commodities allocation.
Headquartered in Boston, Massachusetts, Radius provides customers with a digital user experience along with access to its marketplace - a curated group of financial products that aid in investor education.
“We believe that Save is an ideal partner for joining us in the mission of driving the next era of innovation in financial services. No one else in the banking industry is offering such a unique return potential,” said Chris Tremont, executive vice president, virtual banking at Radius.
Nelskyla adds that benefits for debit card holders under the new scheme come in the form of points from the bank. “What we've done is turned it all around and compiled all the benefits into investments, which means that for every dollar you spend, we invest US$1 for you,” said Nelskyla. “You keep the returns. This goes a long way, considering our mantra of helping people save money.”