Openbank debuts in US with 5.25% but excludes Santander clients | Companies

Openbank, the digital bank of the Santander group, is coming to the United States. It does this through a high-yield savings account with an interest rate of 5.25%, according to information it has begun providing through its website. However, the offer is not available to all potential customers. To avoid cannibalizing its own clientele, the group decided that Santander’s current clients would not be able to benefit from it, nor would those living in areas where the bank has a presence through its offices.

The starter account is called Openbank High Yield Savings and is a savings account rather than a term deposit. To hire one, you must deposit a minimum of $500, be a US citizen or legal resident of the United States, an adult, have a phone number, a tablet or cell phone that allows facial recognition or fingerprint identification, and work through the app.

These are general requirements, but further there are precautions to ensure that Openbank does not lure clients away from the group itself, increasing the cost of its own obligations. “Currently, Openbank High Yield Savings is not available to anyone who also has a deposit account with Santander Bank, N.A. through our retail branch network, or who is a current Santander Bank loan customer, regardless of their location,” the organization said in one from his warnings.

There is a second caveat to avoid entering into direct competition with a traditional commercial bank: “Your zip code must be within Openbank’s current service area, which is all US states except Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey and other US states. New York, Pennsylvania and Rhode Island,” he notes. Excluded are exactly eight states in which the Santander Bank, NA branch network operates.

The group, chaired by Ana Botín, wants to lure customers away from competitors and capture retail deposits through a digital organization. 5.25% is a very attractive interest rate, above the Federal Reserve’s official price of money of 4.75% to 5%. This is advertising profitability that is unlikely to be sustainable over time. In its offer, the bank warns in fine print: “This is a variable rate account and the rate applicable to your balance level may change at any time without notice.” It also warns that “fees can eat into profits,” although it’s currently a no-fee account.

The bank emphasizes that the national average for savings deposit products is 0.46%, so the yield on an Openbank account is more than 10 times higher than the average.

Openbank will operate in the United States not as an independent entity, but as a division of Santander Bank, N.A., a bank whose balance sheets are protected by the Federal Deposit Insurance Corporation up to the legal limit of $250,000. To calculate this guaranteed figure, the client’s balances in both organizations are summed up.

In its commercial communications, Openbank emphasizes the protection of the deposit guarantee fund and the support of the Santander group behind it. “Openbank was created to make banking smart and simple. We are fully digital and have the backing of Santander, one of the largest banks in the world by customer deposits. At Openbank, we combine the best innovations in digital banking with Santander’s 167 years of reliability and stability,” the company points out.

Diary Extension first reported the proposal to launch Openbank in the US.