By Anna Irrera
The accounts, which come with a debit card, will require no minimum balance, will have no monthly fees or deposits requirements and no foreign transactions and overdraft fees, Robinhood said.
The company, which is popular with young consumers for its commission-free stock trading app, will begin rolling out the accounts on Thursday and expects the majority of cards to start shipping in January 2019.
Menlo Park-based Robinhood is part of a growing cohort of young tech-savvy companies that aim to compete with traditional financial institutions by offering cheaper and easier to use services.
Fintech startups will typically spend less to service customers because they have no legacy infrastructure to maintain and have automated a lot of their processes.
Like Robinhood, other fintechs have been expanding the types of financial services they offer and moving beyond their initial area of focus. Many are now seeking to attract deposits, often through enticing rates or low fees.
Student lender Social Finance Inc this year launched a checking account with a 2 percent interest rate, while British money transfer startup TransferWise launched low-cost multi-currency accounts.
Robinhood's interest rate is significantly higher than the average of rates paid by insured depository institutions in the United States, which are 0.06 percent for checking and 0.09 percent for savings, according to the Federal Deposit Insurance Corporation.
Robinhood does not have a bank charter, but will offer its accounts through its license. The startup is a member of the Securities Investor Protection Corporation and cash accounts will be protected up to $250,000.
Robinhood co-CEO Baiju Bhatt said in an interview that as a the company is "very tightly constrained" on what it can do with the deposits and will therefore only be investing in safer assets such as U.S. Treasuries.
It will also make money by collecting interchange fees from the debit card transactions, he said.
Bhatt said the launch was part of the company's ambition to grow into a large institution that could help make financial services more affordable.
"It's more expensive to have less money in this country," Bhatt said. "We think that's wrong."
Robinhood has raised $539 million in funding to date and is valued at $5.6 billion.
(Reporting by Anna Irrera; Editing by Lisa Shumaker)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)