Should You Ditch Your Traditional Bank in Favor of Amazon?
Amazon is expected to begin offering a ” check account-like product ” to consumers who do not yet have bank accounts, the Wall Street Journal reported in March. Other technology companies, such as investment platform Stash and the company to refinance student loans SoFi- , are also trying to get into the game with the current account.
So, should you ditch the traditional bank in favor of a technical alternative?
Technicians naturally hope you will, and not because checking accounts are such lucrative products in and of themselves. For the old banks, checking accounts were the starting point for many clients. It was believed that if you had a checking account, you would have a better chance of opening a savings account, credit card, etc. – products that banks could actually make money from. This is becoming less true than it used to be as the number of options increases and consumer awareness of financial products increases.
But tech companies know how to analyze and use your financial data in a way that banks haven’t done yet, according to Bankrate . They may use your data to tailor other product offerings to suit your financial habits. They hope to become a one-stop shop for consumers.
They can also potentially offer lower commissions and real interest on a checking account. In fact, the SoFi checking / savings account (currently in beta) is offering 1.19% per annum.
Not that they necessarily reinvent the wheel. Bankrate notes that they are partnering with smaller registered banks to avoid problems with regulators. “Banks are gaining access to deposits they can lend, and fintech startups are becoming the main provider of financial services to their clients,” writes Amanda Dixon of Bankrate.
Products are probably best for people with simple finances. As always, beware of commissions – like Acorns, another investment platform that charges $ 3 a month for their Spend product – and consider what you’re getting from an experience that you can’t get elsewhere for free.