Robinhood CEO: Bank Customers ‘Ripped Off,’ Offers 5% APY

Robinhood CEO: Bank Customers ‘Ripped Off,’ Offers 5% APY

Robinhood, the stock trading app that made a name for itself during the GameStop frenzy of 2021, is fighting to regain lost ground amid an exodus from the platform and falling stock prices.

The company will now pay subscription customers a 5% annual percentage yield (APY) on uninvested cash — significantly above payments from traditional banks, which Robinhood CEO Vlad Tenev says have long been duping customers, CNN reported.

Image Credit: Getty Images. Robhinhood CEO Vlad Tenev.

Related: Robinhood Has Made More Than $50 Million in Crypto Trades But Won’t Invest Its Own Money. Here’s Why.

“Customers are beginning to wake up and realize that they have been getting ripped off by these traditional financial institutions,” Tenev told the outlet. “These banks are basically generating all of this revenue that they’re not sharing with customers. We see an opportunity to correct that.”

Robinhood’s 5% APY is one of the highest in the industry. Betterment, which offers a 4.75% APY; Wealthfront, which offers up to 5.5% APY; and Empower, which offers 4.7% APY, are among the other top contenders, per Investopedia.

But unlike the others, which have $0 monthly maintenance fees, Robinhood customers can only lock in that 5% rate if they pay $5 per month for a Gold subscription. The rest will have to settle for 1.5% APY — no 5%, but still much higher than the national average of .58% reported by Bankrate.

“It’s sort of like banks have assumed that customers are not savvy or intelligent enough to realize that rates are changing, and they could be generating a higher risk-free rate of return on their funds backed by the US government,” Tenev told CNN.

Related: 13 Easy Investing Apps and Websites for Millennials

When the outlet approached the American Bankers Association for comment, spokesperson Jeff Sigmund noted that “Robinhood can only offer FDIC protection on some of its products because it partners with FDIC-insured banks.”

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