Please note this blog was originally published on October 16, 2024.
After a year in the making, we’re thrilled to announce the launch of our High-Yield Cash API1. Starting today, our partners around the world can enable their customers to earn up to 4.50% APR (4.59% APY)*2 on USD balances; all managed through our Broker API platform. This milestone marks yet another important step in furthering our global commitment to open financial services to everyone on the planet.
For Your Business
Grow
At its core, High-Yield Cash provides a top-of-funnel growth mechanism that empowers our partners to win cash balances from both new and existing customers. With $16 trillion of deposits at banks in the US alone3, there is a large addressable market globally that our partners will now have the tools to tap into. This has shown to be a non-trivial growth mechanism in the US B2C Fintech market, as we’ve seen with roboadvisor Wealthfront accumulating nearly 50% of total AUM in high-yield cash deposits totaling $27 billion4 and brokerage incumbent Robinhood achieving 128% YoY growth in high-yield cash deposits totaling $18 billion5.
Prosper
With our API comes the optionality for partners to share in interest revenue, allowing them to configure their own take rate or pass it down to boost customer APR/APY. Whether for extending runway, reaching profitability, or increasing profitability as a business, maximizing customer APR/APY at scale can still lead to noteworthy revenue. Revisiting the US examples above, the high-yield cash model helped Wealthfront to double its annual revenue to $200m and reach profitability for the first time as a private company4, while Robinhood was able to book $39m in high-yield cash revenue in Q15 alone earlier this year to extend its profitability as a public company.
Customize
Product and Engineering teams at Alpaca meticulously optimized the High-Yield Cash API for developer experience and flexibility. What this translates to in practice is partners having near-complete control over their cash strategy and customer experience. With account-level APR/APY configurability that can be changed frequently, partners are free to dream up custom qualifying activity and/or rate boost marketing campaigns segmented by individuals or groups of customers.6
For Your Customers
Earn
Enrolled final mile customers can currently earn up to 4.50% APR (4.59% APY)*2 on their USD balances. For US customers, this is nearly 10x the national average**7 and highly competitive amongst B2C fintech comparable product offerings. For ex-US customers, High-Yield Cash is intended to provide a principally protected store of value in USD to help defend against local inflation and currency devaluation.8 Whether managing a cash sleeve within a larger portfolio strategy, building dry powder between trades, or simply seeking a local bank deposit alternative, near endless use cases have the opportunity to earn on cash positions.
Protect
High-Yield Cash balances are potentially eligible for enhanced FDIC insurance coverage in an amount up to $1,000,000 per customer***6 at launch. The Federal Deposit Insurance Corporation (FDIC) plays a critical role in providing stability and confidence in the US financial system. In the event of a bank failure, the FDIC’s Deposit Insurance Fund is intended to ensure that eligible depositors are made whole up to $250,000 per FDIC-insured bank,****and is backed by the full faith and credit of the US government. Since the FDIC’s founding in 1933, protected depositors have not lost even a single penny of FDIC-insured deposits despite every bank failure event over the last 90+ years8. As the High-Yield Cash program grows, we will continually seek to increase the FDIC insurance coverage limits in order to extend protection for the needs of high-net-worth customers.
Use
High-Yield Cash balances are available to withdraw, transfer, and use as immediate buying power for trading activity to take advantage of market opportunities as they present themselves. Customers can say goodbye to multi-business-day transfers between bifurcated high-yield cash and investing product experiences, which is still a common area of user friction in the industry today.
Get Started
Whether you’re a neobank, roboadvisor, brokerage, or fintech platform, we’re here to support your growth strategy with a high-yield offering through this interest rate cycle and future ones to come.
- For prospective partners, please reach out to Alpaca’s Sales team at [email protected].
For existing partners, please contact your Customer Success Manager (CSM) or email the Success team at [email protected].
*Please note that this rate is effective as of September 19, 2024, and is subject to change and may not be the applicable rate on the date this is read.
**The FDIC reports the national average savings account interest rate. This current interest rate is 0.46 APY, effective September 16, 2024, and is subject to change and may not be the interest rate on the date this is read.
***Alpaca Securities customers that enroll in the FDIC Bank Sweep are potentially eligible for enhanced FDIC pass-through insurance coverage. Neither Alpaca nor Alpaca Securities are FDIC-insured. FDIC pass-through insurance coverage is subject to various conditions. The Program’s enhanced FDIC insurance coverage is limited to the aggregate number of participating program banks, multiplied by the FDIC insurance limit (i.e., $250,000). The total number of program banks is subject to change and Alpaca Securities may not utilize all program banks at all times which will affect the Program’s enhanced FDIC insurance coverage amount. In addition, if a customer has a direct banking relationship with a program bank this may affect the amount of funds that are potentially eligible for FDIC-pass through insurance coverage. There is no guarantee that customer funds will be held in such a manner as to maximize possible FDIC pass-through insurance coverage. Please see alpaca.markets/disclosures for further information and important disclosures.
****Securities and cash in brokerage accounts are insured by SIPC and not eligible for FDIC insurance coverage.
1. ‘High-Yield Cash’ or ‘High-Yield Cash API’ is a technology product offered by AlpacaDB, Inc. (“Alpaca”) which allows users to, among other things, access securities brokerage services provided by Alpaca Securities LLC ("Alpaca Securities"), including but not limited to the Alpaca Securities LLC FDIC Bank Sweep Program (the “FDIC Bank Sweep” or “Program”). Alpaca Securities is a member of FINRA/SIPC, and is a wholly-owned subsidiary of AlpacaDB, Inc. Please see alpaca.markets/disclosures for further information and important disclosures.
2. Neither Alpaca, nor any of its affiliates or subsidiaries is a bank. Federal Reserve Bank of New York. (2024). Effective federal funds rate. Effective Federal Funds Rate - FEDERAL RESERVE BANK of NEW YORK. Retrieved October 16, 2024, from <https://www.newyorkfed.org/markets/reference-rates/effr>
3. Federal Deposit Insurance Corporation. (2024). Statistics At A Glance As of June 30, 2024. fdic.gov. Retrieved October 16, 2024, from <https://www.fdic.gov/system/files/2024-08/fdic-2q2024.pdf>
4. Kauflin, J. (2024). How Wealthfront Finally Became Profitable After 14 Years. Forbes.com. Forbes Magazine. Retrieved October 16, 2024, from <https://www.forbes.com/sites/jeffkauflin/2024/06/03/how-high-interest-rates-turbocharged-a-struggling-robo-advisor/?sh=7079fc311947>
5. Robinhood. (2024). Robinhood Q1 2024 earnings presentation. Robinhood.com. Retrieved October 16, 2024, from <https://s28.q4cdn.com/948876185/files/doc_financials/2024/q1/Q1-2024-Earnings-Presentation.pdf>
6. High-Yield Cash API is subject to, among other things, the Alpaca’s API terms and conditions. In addition, customer access to the FDIC Bank Sweep is subject to, among other things, the Alpaca Customer Agreement, Alpaca Terms and Conditions, and the Alpaca FDIC Bank Sweep Program Terms and Conditions. Please see alpaca.markets/disclosures for further information and important disclosures.
7. Federal Deposit Insurance Corporation. (2024). Monthly Update – September 2024. fdic.gov. Retrieved October 16, 2024, from <https://www.fdic.gov/national-rates-and-rate-caps/monthly-update-september-2024>
8. Federal Deposit Insurance Corporation. (2024a). What we do. fdic.gov. Retrieved October 16, 2024, from <https://www.fdic.gov/about/what-we-do>. Balances held by or through Alpaca Securities are treated differently and subject to separate regulatory regimes depending on whether or not funds are held in a brokerage account or held pursuant to the Program. The treatment of customer funds are subject to change from time to time. Please see alpaca.markets/disclosures for further information and important disclosures.
9. Federal Deposit Insurance Corporation. (2024a). The history of FDIC. fdic.gov. Retrieved October 16, 2024, from <https://www.fdic.gov/90years/>
Securities brokerage services are provided by Alpaca Securities, member FINRA/SIPC. Technology and related services are offered by AlpacaDB, Inc.
The testimonials, statements, and opinions presented on the website are applicable to the specific individuals. It is important to note that individual circumstances may vary, and may not be representative of the experience of others. There are no guarantees of future performance or success. The testimonials are voluntarily provided and are not paid, nor were they provided with free products, services or any other benefit in exchange for said statements.
Please note that the content of this piece article is for general information only and is believed to be accurate as of the posting date but may be subject to change. Alpaca and its affiliates do not provide investment, tax, or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made herein.
All investments involve risk, and the past performance of a security, or financial product does not guarantee future results or returns. There is no guarantee that any investment strategy will achieve its objectives. Please note that diversification does not ensure a profit, or protect against loss. There is always the potential of losing money when you invest in securities, or other financial products. Investors should consider their investment objectives and risks carefully before investing.
This is not an offer, solicitation of an offer, or advice to buy or sell securities or open a brokerage account in any jurisdiction where Alpaca Securities are not registered or licensed, as applicable.
Alpaca Securities offers a cash management program pursuant to the FDIC Bank Sweep. Customer funds are treated differently and are subject to separate regulatory regimes depending on whether customer funds are held in their brokerage account or within the FDIC Bank Sweep. Specifically, Alpaca Securities is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per deposit against the failure of an FDIC member bank. Customer funds held in brokerage accounts are SIPC insured, but are not eligible for FDIC insurance coverage. Funds maintained in the FDIC Bank Sweep are intended to be eligible for pass-through FDIC insurance coverage, but are not subject to SIPC coverage. FDIC insurance coverage does not protect against the failure of Alpaca, Alpaca Securities, or any of its or their affiliates and/or malfeasance by any Alpaca or Alpaca Securities employee. Program banks that participate in the FDIC Bank Sweep are not members of SIPC and therefore funds held in the Program are not SIPC protected. Please see alpaca.markets/disclosures for important additional disclosures regarding Alpaca Securities brokerage offering as well as FDIC Bank Sweep terms and conditions.
