Just four days after the launch of the Goldman-Sachs-backed Apple Savings account, users collectively deposited nearly $1 billion, according to two sources familiar with the subject.
On launch day, the savings account received close to $400 million in deposits. With banks currently offering an annual interest rate of less than half of a percent, the biggest drivers that facilitated the surge of account openings can be attributed to its 4.25% annual interest rate and the virtual ubiquity of the iPhone.
Banks Are Falling Short on Savings Accounts
With the Fed preparing to increase interest rates once again, banks have taken a more reactionary approach:
Richard Crone, CEO and founder of payments firm Crone Consulting, told Forbes:
“Banks have quickly responded to the Fed’s interest rate hikes with higher mortgage and car loan rates, but savers have seen little to no increase in traditional bank deposits or savings accounts. There’s an outflow to CDs, money market funds, and fintechs like Apple.”
With consumer confidence in banks beginning to slip and deposits making a dramatic exodus, bank failures may continue as was recently seen with First Republic Bank and Silicon Valley Bank in March. First Republic Bank was the second-largest bank failure in U.S. history, and it was admitted by the Fed that they had failed to offer supervision and regulation.
What Sets Apple Apart
We recently covered how Apple is tapping into savings amid tight competition among financial institutions. But Apple brings more to the table than the traditional FIs in the market. For example, Apple Card has no annual or late fees, but users must own an iPhone that uses iOS 12.4 or later. They must also have an Apple ID, along with an iCloud account that is in good standing. Furthermore, the user’s annual percentage rate (APR) for purchases is contingent on their credit history and it can vary from 16% to 27%.
Apple Savings is only available for holders of Apple’s credit card, the Apple Card. In less than a minute, users can open their savings account directly from their iPhone. All Apple Card spend rewards, also called daily cash, are funneled into the high yield account.