Online wealth advisor Betterment launches checking and savings accounts

Online wealth advisor Betterment is launching checking and savings accounts.

Founder and CEO Jon Stein said having the highest rate is part of a strategy to usher in new customers, and a more obvious way to compare value between banks and other fintech checking account offerings.

“It’s really hard for banks to follow us here,” Stein told CNBC in a phone interview. “If you look at where the big banks and brokerages make most of their money in their retail savings accounts.”

The savings account will have 2.69% annual yield, higher than the average yield nationally of 0.10%, according to Bankrate.com. Betterment charges 25 basis points, or .25%, on its investment accounts. For the new products, it plans to profit off of part of the interchange fee charged when you swipe a debit card, which it also shares with Visa and the acquiring banks.

Since Betterment is not a bank, in order to offer banking services it has to partner with FDIC-insured institutions. This is a common set-up for fintech companies offering financial services that don’t have a bank charter themselves. Customers’ deposits will be held at federally insured banks including Citi, Barclays and Valley National. Those checking accounts are insured up to $250,000 by the FDIC, while savings accounts are insured up to $1 million, according to Betterment.

Betterment is joining a handful of start-ups that have launched accounts in an attempt to lure yield-hungry customers. Wealthfront launched a cash account in February, has attracted $1 billion in deposits since, and recently raised the interest rate on their checking account to 2.57%. Fintech start-ups SoFi and Acorns have debit-like accounts, too.

Betterment has raised $275 million to date from investors like Citi Ventures Menlo Ventures. It notched an $800 million valuation after its Series E funding round, according to Pitchbook.