Level, a digital banking startup based in San Francisco, is trying to hook customers with a 2.1% savings account annual percentage yield.

The company, which launched its products nationally Wednesday, is coming into the market as fintech startups like Wealthfront, Betterment and Varo are touting high-yield savings accounts to vie for market share.

Level is also offering 1% debit card rewards and paycheck deposits two days early to sweeten the deal for customers. The company said it’s able to offer these competitive rates because the digital distribution model keeps costs under control.

The company “keeps marketing costs low and allows the product to spread without spending what traditional banks spend,” said Bryce Galen, founder and CEO of Level. “We also make interchange revenue from people who don’t have the $1,000 deposit.”

Like all challenger banks, deposits made into a Level account are insured by the FDIC. However, Level does not have a banking license and has opted to partner with Evolve Bank & Trust, to provide banking services. Galen would not confirm or deny if the savings account APY will eventually drop, a trajectory digital banks and startups have taken in response to the Federal Reserve’s decision to lower the federal funds rate.

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Galen said the product, which is currently live with friends and family of Level employees, is receiving good early feedback.
The number of customers “is growing nicely and it’s part of why we have the experience to be able to launch a full-featured debit product and not worry about scaling like other startups do,” Galen said. “We’ve got all the infrastructure in place.”

Alongside the cash-back rewards and high APY, Level is reportedly working to connect with Apple Pay and Google Pay. According to Level’s website, Apple Pay is expected to be connected to accounts by April. The startup also offers the Zero credit card, which was launched last year.

The past year has seen the rise of digital banks and digital banking startups, many of which offer cash back rewards and lifestyle perks. Texas-based Bask Bank, for example, offers a fee-free digital savings bank funded by Texas Capital Bank, through which customers can accumulate American Airlines AAdvantage miles for every dollar deposited. In late 2019, digital bank N26 partnered with scooter-rental company Lime and online travel platform Booking.com to offer added rewards to customers who transact using N26 debit cards.

Despite the saturation of the market with digital banking offerings from incumbents and startups, Galen said Level is not worried about competition.

“We fill a market need — other banks don’t offer an attractive [interest] rate,” Galen said, adding that Level is for “people who are not willing to compromise and want to use a digital banking app and get great rates.”

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