Lessons To Learn From Beam Financial, The Houdini Of Fintechs

In recent months, a negative spotlight has formed on Beam Financial, the consumer mobile banking app that promised to be the first high interest bank account for millennials.

Launched in 2019, Beam set a clear goal to make high-interest bank accounts “accessible to all Americans,” regardless of wealth status, account balance, or whether they would be eligible for cross-selling of other financial products. According to the company website, Beam offers to provide up to 4% interest on federally insured savings which was well over the traditional bank average of 0.01% per year. Added to this was an incentive scheme that rewarded customers who referred users to Beam by offering incrementally earned interest rate rises. The problem was, it wasn’t quite clear where this interest was earned from or how the app would generate income. Needless to say, the financing did not add up to experts.

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In just over a year later, the company’s false promises are unravelling starkly with dire consequences for those who pursued the perceived benefits. The Federal Trade Commission was enlisted to investigate the rapidly rising number of consumer complaints surrounding the dubious fintech. While many stories have been shared, they all follow a similar trope. A customer would sign up for Beam, deposit some amount of their savings hoping to reap the advertised interest, run various personal campaigns to encourage sign-ups for added interest, see some interest accrue (not quite the advertised amount), and hit a roadblock when attempting to withdraw their money. Despite this, Beam boldly advertises 24/7 access to funds and no withdrawal limits.

Following this roadblock, users have experienced various excuses from the company including app crashes blamed on increased traffic to the app store, as well as partnered banks limiting withdrawals. And while Beam listed over 50 partnered banking institutions on its website, when CNBC reached out to the institutions, the 17 who responded denied any partnership. Following this discovery, the website removed listings of affiliate banks.

To make things worse, users also found that Beam was also not insured by The FDIC as advertised. For this, and a myriad of other public reasons shared in complaints online, via the app store, and made to the Federal Trade Commission, the FTC has opened a Civil Investigative Demand on the company. Beam’s founder who goes by Yinan Du and/or Aaron Du, remains silent on the matter.

With over 180,000 users on the app all facing financial stress during a turbulent year, the consequences of this uncertainty and lack of resolution with having funds returned is no doubt harrowing for users. While it remains unclear what paths will be taken to help users reclaim their funds, the lessons are clear for observers. For consumers, if any financial product sounds too good to be true, it probably is. And for banks, rigorous due diligence should be conducted on fintech partners before engaging in their offers.