LONDON (Reuters) - London-based financial technology startup Revolut will offer U.S. customers a 4.5% bonus rate on savings deposits, it said on Thursday, making it the latest fintech looking to lure clients through higher interest rates than those offered by banks.
Customers will receive the bonus on top of their existing annualized rates of 0.25% or 0.5%, Revolut said.
The amount of funds eligible for the new rate will be equivalent to how much a customer has spent in the previous month using the company’s debit card, its flagship offer.
That means a user that has $400 in savings on Revolut and has spent $200 with the company’s card will receive the bonus for half of their savings balance, paid out on the first business day of the following month.
As Revolut and its U.S. digital banking competitors make money from debit card interchange fees, linking the new rate to card usage will allow the company to make the offer more sustainable, a source familiar with the plans said.
“We have done that to make sure we have profitable customers, so it’s not just a short-term tactic,” the person said.
One of Europe’s best-known fintech startups, Revolut opened its virtual American doors in March following U.S. launches by European competitors Monzo and N26. It is now approaching 500,000 U.S. customers and 13 million globally, the source said.
Analysts and investors have questioned whether the incomers could stand out with overseas customers in an increasingly crowded digital banking market.
The launch of the new rate will make Revolut the latest app-based checking and savings account provider to try to achieve that prominence through higher than average returns and other perks.
Average rates at insured U.S. depository institutions, including mainstream banks, are 0.04% for checking accounts and 0.05 percent for savings, according to the Federal Deposit Insurance Corporation.
Nik Storonsky, Revolut’s founder and chief executive, said in a statement that the company was launching the new rate to help consumers hit by the economic impact of COVID-19.
While digital banks have been rapidly growing their client base, analysts have raised questions about their ability to become profitable. Revolut is aiming to reach profitability next year, the person said.
Reporting by Anna Irrera; Editing by Jan Harvey
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