Contrary Research Rundown #33
Unpacking how rising rates are benefiting non-banking players, and new memos on Chime, Modern Treasury and more
Research Rundown
In the wake of several bank collapses, many have wondered where and how to store their hard-earned money safely. Charles Schwab, State Street, and M&T saw $60 billion in combined bank deposit outflows in Q1 as customers moved their money in search of safe parking and higher returns. First Republic Bank’s net outflows have exceeded $100 billion in recent weeks, and the bank was recently sold to JP Morgan as a result.
Brokerages may be viable for storing savings as they offer higher yields and better account protection than traditional banks. Smaller and more regional banks are searching for more deposits, which benefits brokerage startups like Betterment and Wealthfront by allowing them to negotiate better savings rates from their partner banks. The FDIC does not insure brokerages, but customers can receive coverage through cash sweep programs offered in most brokerage accounts. Cash sweeps transfer funds not invested in stocks or other assets to partner banks, each providing up to $250K in FDIC insurance. Splitting funds in this way across banks means more total FDIC coverage for the customer.
Wealthfront increases its cash account yield when the Federal Reserve raises the central bank rate. How much of that increase goes to customers depends on the rate bank partners are willing to pay Wealthfront. In March, Wealthfront raised its rate to 4.3% from 4.05%, consecutively passing all the increases to customers. It announced its increasing it to 4.55% on May 3rd. To learn more about Wealthfront, check out our memo.
In March, Betterment doubled its coverage to $2 million and $4 million for joint accounts for its cash accounts, which can earn a 4.20% APY. Robinhood said it would protect customers up to $1.5 million (a number which will increase to $2 million on or after June 1, 2023) in insured deposits and provide 4% on certain accounts for Robinhood Gold members, a monthly subscription service for uninvested cash. More recently, in April, Apple announced that Apple Card users could choose to grow their Daily Cash rewards with a savings account from Goldman Sachs, which offers a high-yield APY of 4.15%. This offering has no fees, minimum deposits, or minimum balance requirements; users can set up and manage their savings account directly from Apple Card in Wallet. Apple has brought in ~$990 million in deposits over its first 4 days, with nearly $400 million of that coming on launch day alone.
On Thursday, regional bank stocks dropped despite the Federal Reserve’s assurances of the banking system’s stability. Investors are concerned the regional banking issues may expand and affect the broader economy. Amidst the uncertainty, brokerages seem like an increasingly convenient and safe option to park money and earn yields higher than the big banks offer.
Pendo is a product experience platform that allows companies to combine usage analytics with in-app guidance and user feedback, enabling teams to deliver better experiences. To learn more, read our full memo here.
Gecko Robotics builds wall-climbing robots and enterprise software to protect the physical infrastructure that underpins daily life. To learn more, read our full memo here.
Nuro creates autonomous delivery vehicles for local goods transportation and aims to transform the last-mile delivery landscape. To learn more, read our full memo here.
Modern Treasury provides payment operations software for companies, enabling them to automates the cycle of money movement—from payment initiation, through approvals, to reconciliation. To learn more, read our full memo here.
Chime is a neobank that provides consumer banking services through its mobile app. It offers no-fee bank accounts, debit cards, and a way to get paychecks two days in advance. To learn more, read our full memo here.
An interview with AI pioneer Geoffrey Hinton, who recently left Google after over a decade to speak about AI’s risks, quitting the company, and more.
Istanbul-based grocery delivery startup Getir is in talks to acquire its German rival Flink, which is in talks to raise ~$100M at a $1B+ valuation.
Apple’s high-yield savings account offering a 4.15% annual return brought in ~$990M in deposits over its first four days and nearly $400M on launch day.
Microsoft partnered with PayPal, Stripe, and GoDaddy to launch a payments system inside Teams to let SMBs in the US and Canada collect payments during a meeting.
TikTok plans to label videos featuring deep fakes or other generative AI techniques to produce audio or video to combat misinformation and copyright concerns.
Doctors in California and Wisconsin are part of a pilot program using ChatGPT to read patient messages and draft responses to save time.
Snap said it has begun testing sponsored links in My AI conversations, revealing Spotlight grew 170% YoY to 350 MAUs, launched the “First Story” ad product.
Box is partnering with OpenAI to bring generative AI tools across the platform.
Inflection AI, the startup from ex-DeepMind cofounder Mustafa Suleyman, has launched its first chatbot, Pi.
BeReal rolled out RealPeople, a curated timeline of updates from “the world’s most interesting people”, first in the UK, to keep users engaged as growth slows.
TikTok announced Pulse Premiere, which lets select publishers such as Condé Nast, BuzzFeed, and NBC sell ads alongside their posts and keep 50% of the revenue.
Thrasio, Razor, Perch, and other Amazon aggregators, which raised $16B in mostly debt, are struggling under rising rates, higher costs, and slow online demand.
Uber partners with Stripe to enhance payments performance and reduce costs. Check out our deep dive on Stripe.
Airbnb announced Airbnb Rooms, a new category for individual rooms, and 50+ features and upgrades to improve price transparency, checkout procedures.
Khan Academy pilots Khanmigo, a GPT-based chatbot to help students with math problems, debugging code, debating, and other topics without enabling cheating.
Salesforce announced SlackGPT, planning to add generative AI features to Slack to summarize meetings and more, and will incorporate EinsteinGPT into Slack.
The White House announced plans to combat AI’s risks, including $140M for new research and draft guidelines for agencies to ensure the safe use of AI.
Hugging Face and ServiceNow Research released StarCoder, a free alternative to code-generating AI like GitHub's Copilot, as part of the BigCode project.