September 12, 2023
Banks often pay for the ability to hold and invest customer deposits; that payment is called interest. When a tech company partners with a bank to make bank accounts available to their customers, the tech company has the option to take a fee from the interest earned on those deposits.
For example, when Roofstock makes embedded bank accounts available to their customers, those accounts earn interest and generate revenue for . In this case, they’re getting paid by Blue Ridge Bank, their bank partner.
How much you earn will depend, first and foremost, on what your bank partner is willing and able to offer. In some embedded-banking relationships, the tech company does not earn revenue from interest. In others, the bank is willing to offer interest at near-market rates. So if revenue from interest is important to you, you should surface it early in discussions with potential banking-as-a-service platforms and bank partners. (article continues below)
Earning interest on your customers’ deposits is particularly compelling in light of the current high-interest-rate environment. Today, rates hover around 5%, and they’re expected to continue rising through at least 2024.