Robinhood is launching a 3% interest savings account

I've been keeping my emergency savings in VMSXX (vanguard's Muni bond money market) for a while now since on a tax equivalent basis, the yield (for me, it depends on your income and state) is roughly 2.5-2.6%. Maybe I'll switch to this.

My question is though: how the heck are they doing it, and is it sustainable?

It's a subsidy to grow their user base. Think selling gaming consoles at a loss to accrue a user base that buys more games.

This feels like FinTech Moviepass. I understand how they monetize their brokerage trades but how are they going to make money on this?

They put excess money from brokerage accounts in treasury bonds (And get to keep the returns from that) in addition to robinhood gold. I suspect much of their money is made my selling their order flow to big banks along with robinhood gold.

This also makes it much easier for them to hawk their brokerage services to those who already have money in their checking accounts.

So they won’t make money on this and admit they are buying users. Seems like a bad idea and makes me question their solvency in the future.

I presume not FDIC-insured.