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A guide to interest revenue and high-yield accounts

By offering embedded bank accounts, you deliver more value to customers while creating robust revenue streams for your company. Learn how to get started.

Last updated:

February 23, 2024

8 minutes

Generate revenue from interest by offering bank accounts to your customers

As tech companies grow and scale, they must prioritize generating new revenue and earning more revenue per user. 

In recent years, leading brands like Uber and Shopify have popularized a simple solution to this problem:

  1. Enable customers to store deposits in embedded bank accounts
  2. Generate revenue from the interest your customers earn on those deposits

This arrangement—in which a tech company like Apple partners with a bank to make high-yield accounts available to customers—is known as embedded banking. Embedded bank accounts work just like other bank accounts; they come with cards and statements. And, significantly, they generate interest.

Apple’s new high-yield savings accounts brought in nearly $1 billion in deposits in the first four days.

Generating revenue from 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.

If you’re a tech leader who’s thinking about how to drive more revenue per user, this guide is for you. In it, we’ll explain how to earn revenue from interest on your customers’ deposits, covering topics like:

  • How interest revenue works
  • How much you could earn from your customers’ deposits
  • How to start earning revenue from interest
Interest rates are expected to continue rising through at least 2024.

How interest revenue works

Let’s explore how tech companies like Roofstock earn revenue from the interest on their customers’ deposits. 

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 can take a fee from the interest earned on those deposits.

For example, when Stessa (a Roofstock company) makes embedded bank accounts available to their customers, those accounts earn interest. In this case, Roofstock passes the majority of that interest along to their customers in the form of a high annual percentage yield (APY).

How is interest calculated? It may surprise you to learn that there are many ways to do it; the formula in the next section is just one example. Which formula you use will depend on your business model and your 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.

How much could you be earning?

To illustrate how much you could earn from interest on your customers’ deposits, let’s use an example.

Say you’re the VP of Product at Titan, an investment-management platform. By offering your customers bank accounts, you enable them to manage their cash and investment assets in one place.  

Let’s assume that, in your first month, your customers hold $100 million of deposits in your program, and you’ve negotiated a 4% APY (annual percentage yield) with your bank partner. For the sake of simplicity, let’s also assume that the balance in the account remains constant throughout the month (i.e., there are no transactions), and that you receive monthly—rather than daily—interest payments.

Your agreement with your bank partner stipulates that you calculate interest using the following equation. At the end of your first month, you would receive $333,333.33.

What can you do with revenue from interest?

Embedded bank accounts may be more appealing to your customers if they come with higher interest rates and/or offer better rewards. High-yield accounts can lead to new-customer acquisition, enhanced engagement, and increased retention.

However, that requires keeping less revenue for yourself. It’s a strategic choice that each company manages in its own way. 

In the above example, Titan has a few options when thinking about how to deploy their interest revenue: 

  1. Capture the full share. At the end of each month, Titan is paid $333K. In this scenario, they put that money toward operational expenses and profits.
  1. Customers keep all of the interest. Titan’s customers receive $333K at the end of the month via cash deposits in their accounts; Titan does not exact any deposit fees.
  1. Charge customers a part of the interest they earn. For example, if Titan decided to charge customers a 50% deposit fee, their customers would effectively pay Titan half of the $333K (about $166.7K).

Titan could also vary their deposit fees by customer segment. As an example, they could offer a full 4% interest to customers who hold more than $100K in their accounts, while offering 3% to everyone else—and keeping the difference.

Apple’s recent launch of high-yield savings accounts is an example of option two (above). In this case, Apple passes the interest along to their customers at competitive rates—a compelling offer for new customers.

Apple’s high-yield savings accounts offer a competitive interest rate; it’s a strategic choice to drive new-customer acquisition.

Additional revenue streams from embedded banking

Earning revenue on your customers’ deposits is perhaps the most obvious way to make money from embedded financial products—but it’s hardly the only one. Based on our experience, these other revenue streams have the potential to be even more lucrative than revenue from interest. 

  • Interchange. When your customers make card purchases, you earn a fixed percentage of the net interchange from each transaction. 
  • Payment fees. It’s possible to charge your customers for certain payment types, especially those that offer enhanced speed (e.g., wire transfers, instant payouts, push-to-card).
  • SaaS tiers. Some platforms charge their customers a fee to access premium features like embedded banking. 

Start earning interest on your customers’ deposits

Offering your customers embedded bank accounts may sound daunting—but it’s easier than you think.

Our company, Unit, is a banking-as-a-service platform. That means we help companies like yours launch interest-earning bank accounts (among other financial products). Many of our customers are able to launch quickly, with minimal engineering resources, using our White-Label UI Components.

Curious about embedded banking? Wondering whether it’s a fit for your company? Drop us a line—or just sign up for our sandbox and start building.

Originally published:

May 1, 2023

In this guide

Frequently asked questions

How are interest rates determined?

The Federal Reserve sets the Effective Fed Funds Rate, which impacts short-term and variable interest rates. Banks adjust their individual rates accordingly.

The Fed uses interest rates as a way either to spur economic activity (lower rates) or to curb inflation (higher rates), depending on the needs of the moment.

Learn more

What happens when the Fed lowers interest rates?

Inevitably, interest rates will change. The Fed raises or lowers interest rates to respond to the economic needs of the moment. 

When interest rates come down, the revenue you earn from your customers’ deposits will also come down. That said, you may be able to make up for it by earning additional revenue from other embedded financial products. 

For example, when interest rates fall, it becomes cheaper to borrow. At that point, lending and financing products may become more attractive to customers.

Learn more

What else can I build with embedded banking?

Once you’ve built a foundation of embedded bank accounts, you may consider offering additional revenue-generating financial products tailored to your customers’ needs. For example: 

  • Instant payouts. Generally, it takes 2-3 business days for funds to land in your customers’ bank accounts after they've been paid. With instant payouts, when you see that a payment to one of your customers has been initiated, you can enable them to access the funds before they settle in their accounts. Instant payouts can be a great way to offer your customers faster money movement and drive better customer retention. 
  • Lending and financing options. Compared with traditional financial providers, your company is uniquely well-positioned to help your customers. You understand your industry and your customers deeply. That deep knowledge of your customers can be used to inform better underwriting decisions. The lending and financing solutions you design can be customized to the rates and terms that your customers actually want.

Learn more

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