In a bid to grow its deposit base, digital-only Radius Bank is folding debit-based rewards and high-yield savings into one product called Rewards Checking. The account offers 1% cash back on debit transactions and up to 1.2% APY on savings. To access the savings, however, customers need to keep at least $2,500 in their rewards checking account.
Radius has been the partner bank for many financial startups in recent years, including Stackin and NorthOne. While partnerships extend Radius’ reach, the Rewards Checking product helps Radius build its own brand while growing its deposit base. It’s a strategy Green Dot, which also partners with fintech startups, is pursuing with its Unlimited account, launched in July. Green Dot offers 3% cash back on debit-based rewards for online and in-app transactions and 3% interest on savings balances up to $10,000.
Green Dot and Radius, however, are competing with other digital-only banks like Varo and MoneyLion, which offers debit-based rewards and high-yield savings products. With Rewards Checking, Radius is aiming to own customers’ primary banking relationships so it can use the data to offer a more personalized banking experience.
Kathleen Barrett, assistant vice president of marketing at Radius, told Bank Innovation that the product offers a line of sight into customers’ transaction behaviors, which in turn lets it tailor their experiences. The bank also uses customer data to inform which startup partnerships it could pursue and possibilities for products it could launch.
While the $2,500 minimum balance requirement could deter some customers, the product could appeal to others who want to benefit from cashback rewards and interest on a savings account at the same time, said Stephen Greer, senior analyst at Celent. “A lot of people don’t use credit cards so, if you’re a person who doesn’t, this could potentially be attractive,” he added.
Radius’ digital-only banking approach is part of a bigger strategy in recent years to align itself closer to the fintech and startup ecosystem. As part of this effort, Radius has been white-labeling its banking products to startups and ramping up its product offerings.
While a digital-only banking model can save money, it does present other challenges, according to Aite Group senior analyst Thad Peterson. “Without physicality, there needs to be an incentive for some consumers to be persuaded to switch to a virtual financial institution,” he said.