New banks

Rize’s new fiat-based high-yield savings account challenges its counter crypto options

  • High-yield savings accounts tend not to yield such high APYs. Crypto-based options have been stepping in as a more rewarding alternative.
  • But crypto is volatile and these accounts come with risks. Rize’s new fiat-based solution comes in with an alternative.

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Rize’s new fiat-based high-yield savings account challenges its counter crypto options

This month, Rize, a fintech-as-a-service company, partnered with YieldX, an AI platform focused on income investing, to build a high-yield savings account option that’s fiat-based, rather than crypto-based. 

Through the account, consumers can choose yield targets of up to 8%. The account also has a built-in embedded compliance system covering both banking and regulatory ground. There’s same-day liquidity and no requirements surrounding things like deposit, withdrawal or holding period.

The account is built up of a set of APIs. YieldX’s algorithms determine the lowest risk and highest yield funds. The end result is that Rize’s fintech clients are able to integrate this account into their own offerings.

Typically, to hit targets like these, companies need to rely on crypto in some way. Otherwise the APY will be considerably lower. 

Ally Bank, Chime and Goldman Sachs’ Marcus, for example, all offer an APY of 0.5%, with no minimum balance. Meanwhile, crypto firms like Gemini and are able to offer APYs of around 8%.

Still, relying on crypto firms like these come with risks for the consumer, including crypto volatility. And for fintechs hoping to offer high-interest savings, opting for a crypto-based move could mean an expensive and bulky integration process.  

The main appeal of Rize’s new product is that it seems less risky overall compared to  crypto-based options. There’s no chance of crypto volatility and it’s cheaper and easier for companies to integrate. 

“While products like this may be complex in nature elsewhere, we wanted to ensure that fintech startups building out their product offering are able to include an account like this which will be highly attractive to potential customers without the added challenge of building it in-house,” said Justin Howell, CEO of Rize.

Another difference Howell mentions is built-in regulatory compliance. Companies have gotten in trouble in the past with their high-yield interest products for not complying with regulations.

BlockFi, for example, offered a high-yield interest account that, according to the company, could earn up to 9.25% on crypto deposits. Last month, however, the company got in trouble with the SEC for not properly registering itself as an investment company. This resulted in BlockFi being hit with $100 million in penalties. In 2021,Coinbase announced it was dropping its high-yield product after warnings from the SEC that it would take legal action.

Still, there have been some challenges with making a product like this work, according to Howell. That’s included things like avoiding regulatory mishaps and dealing with fund flows.

“What was particularly time-consuming was surfacing the ability for clients to offer very discrete account types across the FDIC-regulated world and SIPC regulated world, ensuring appropriate disclosures for consumers, and making sure that the pipes were built to enable this easy funding between custodians,” he said. “However, given our unique ledgering technology that was built to be cross-vertical, we didn't have to start from scratch. Ultimately time, effort, and willing partners were needed to map out how to deliver this product to clients, whether fintechs or non-fintechs.”

Rize’s new savings product still hasn’t launched, but as current interest rates hikes take effect, it will be interesting to see what type of attention a product like this could attract in the market. 

“In the near term, while interest rates will rise, banks are so flush with deposits that they are not likely to increase savings rates themselves – which then leaves consumers in a place where loans are costing more but they’re not receiving the benefit of the savings,”  said Howell. 

“Opening these accounts in the brokerage world ensures utilizing the dynamism of fixed income markets and allows us to offer competitive yields no matter the underlying monetary policy.”

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