How Apple and Starbucks are like banks : The Indicator from Planet Money You've heard of The Price Is Right, but what about Is This A Bank? It's a game show where contestants puzzle over some obvious and not-so-obvious places where people store their money. This podcast may or may not remind you where your secret stashes of cash are hidden.

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Is this a bank?

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC'S "WAKING UP TO THE FIRE")

DARIAN WOODS, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Darian Woods.

WAILIN WONG, HOST:

And I'm Wailin Wong. So the other day, I was thinking of all the places where I have money squirreled away, you know, not just my regular bank account but the small balances I have on Venmo and PayPal and Cash app.

WOODS: Right. So the digital equivalent of money in the back of the couch.

WONG: Exactly. You go digging in there, you're going to come up with some pretty gross stuff but also maybe a few bucks.

WOODS: Yeah, that's the goal. Maybe enough to buy a couple of ice creams.

WONG: That's right. And, you know, if you think about all the apps out there for making payments and investing and budgeting, there are just a lot of companies vying to be part of our financial lives.

WOODS: It's kind of like all these companies want to be banks.

WONG: Darian, I think you are onto something. So today, we are going to play a little game we're calling, Is This A Bank?

WOODS: My favorite.

WONG: Who needs "The Price Is Right" when you've got Is This A Bank? We'll look at some obvious and not so obvious candidates for where people are storing their money.

(SOUNDBITE OF MUSIC)

WONG: Welcome back to Is This A Bank? - the game show where we describe what a company does and try to figure out if it's a bank. Darian Woods, would you like to explain to our studio audience what a bank actually is?

WOODS: Right. So a bank takes deposits from customers. It basically borrows from everyday people like you and me, and then it lends that money out. And hopefully, from the bank's perspective, it's making a bit of a cut on the difference between those two interest rates.

WONG: Amazing. Thank you for that concise definition, Darian.

WOODS: I love to please.

WONG: And now I feel like we are fully ready to play Is This A Bank? For round one, we'll start with a company that's been around a long time, PayPal. You can use PayPal to pay for online purchases or to send money electronically to a friend. You can get a debit card or a personal line of credit. You can even get a small business loan from PayPal.

WOODS: So is PayPal a bank? We floated this question past Mary Wisniewski. She was a financial technology reporter for many years and is currently at Cornerstone Advisors, which is a company that consults for banks and credit unions.

WONG: If you just surveyed, you know, like a random sample of people passing by on the street and you asked them, is PayPal a bank? - do you think most of them would say yes?

MARY WISNIEWSKI: I feel like they'd be like, why are you asking this?

(LAUGHTER)

WOODS: For the game show. For the game show.

WONG: We're asking 'cause we're playing Is This A Bank? That's why we're here. So, you know, I'm going to ask you, Darian, do you think PayPal is a bank?

(CHEERING AND BOOING)

WOODS: Well, the audience seems to be split. I'm also torn because on the one hand, yeah, the goal is not to have people just have these giant PayPal balances. It's not really what it's for. It's mainly for transferring money. But people do leave money there, as you've mentioned. So when they do that, I'm assuming PayPal is going out and making the most of it and investing it. So I would lean towards yes.

WONG: That is also my answer. I was going to say, yes, it's a bank but with one big caveat. So like you mentioned, PayPal is taking in money. It's also lending out money, much like a traditional bank. But it's missing one key component that licensed and regulated banks do have in the U.S., and that is deposit insurance from the FDIC. That is the government agency that guarantees your savings up to $250,000.

WOODS: Right. So if I've got money stored in a PayPal account and the company suddenly collapses, like Silicon Valley Bank did earlier in the year, the government doesn't have an obligation to step in.

WONG: It does not. And a basic PayPal balance is not covered by FDIC insurance. Same thing with balances on Venmo, which is owned by PayPal. And, in fact, on PayPal's website, the company says PayPal is not a bank. Mary says people definitely treat PayPal like a bank, but they should not be maintaining huge balances on these platforms.

WISNIEWSKI: That's not a good idea, and people do do that.

WONG: I'm not doing it, but it sounds like some people do do it.

WOODS: Wailin, according to what you said at the start of the show, I think you do do it.

WONG: I'm not keeping a huge balance. I'm keeping a small balance.

WISNIEWSKI: Don't keep that huge balance. There was even a - the CFPB put out a warning like, don't keep all your money in these kind of things 'cause you don't get the same guarantees.

WONG: The CFPB is the Consumer Financial Protection Bureau. And in June, the agency put out an advisory telling consumers that their money is at greater risk when stored with one of these payment apps than at an FDIC-insured bank. The CFPB also warned that these companies might invest the money they get from customers, but their investments aren't subject to the same kind of oversight that a regulated bank would get.

WOODS: OK, so PayPal almost a bank with some big asterisks when it comes to supervision and insurance. What's next? Who else are we looking at?

WONG: In round two of Is This A Bank? - let's consider Apple. It's been almost a decade since the company launched Apple Pay, its mobile payment service. It's since introduced a credit card and its own buy now, pay later lending program. And its newest offering is a high-yield savings account that pays over 4% interest. That's pretty competitive with other high-yield accounts out there right now. And as of last week, Apple Savings has captured over $10 billion in deposits. So, Darian, is Apple a bank?

(CHEERING)

WOODS: OK, well, there's a pretty clear sentiment from the crowd. And I would agree. Taking money in, giving an interest rate, presumably lending that out - very firm bank behavior.

WONG: You're like, I know a bank when I smell one.

WOODS: It looks like one. It talks like one. It quacks like one.

WONG: It lends like one.

WOODS: It lends like a bank.

WONG: Yes, I would agree with you. And Apple Savings customers even get FDIC insurance. That's because Apple has an arrangement with Goldman Sachs. And Goldman's bank is actually the one providing the accounts. So Apple customers are protected by Goldman Sachs' FDIC guarantee. Mary says this is a common arrangement in the financial technology industry.

WISNIEWSKI: The tech companies tend to, you know, design the experience, the digital experience. And then they partner with the bank that is responsible for, like, managing the deposits.

WONG: And Mary says the Apple banking experience has been a little mixed. On one hand, it took her just under a minute to sign up for an account - very easy. But The Wall Street Journal reported that some customers were hit with delays trying to transfer money from their Apple accounts to other bank accounts. Last month, Apple gave affected customers $100 apiece as a goodwill credit.

WOODS: So we've got Apple pushing into financial services, with some bumps along the way.

WONG: And now it's onto our final round of Is This A Bank? We are turning our attention to Starbucks. The company has a long-standing loyalty program where customers can load money onto a mobile app to pay for their, you know, egg bites and Frappuccinos.

WOODS: Right. So they get the convenience of ordering and prepaying through the app. And the more that the people spend, the more rewards they earn. Like, they get free coffees.

WONG: And they're incentivized to preload money on their app because they actually earn more rewards that way. According to regulatory filings, Starbucks customers have socked away $1.6 billion in the app and on gift cards. So is Starbucks a bank?

WOODS: Huh. I think - well, I think I can't rely on the audience anymore. They seem a little unsure. I would argue yes, this is banking behavior. I assume Starbucks is doing something with that money. I don't think they're just holding it in that account. And so if they are, I would say it is a bank.

WONG: Yeah, I think of Starbucks as, like, a sneaky bank. It's a coffee company, of course, but it's sitting on a pretty big pile of people's savings. I mean, at $1.6 billion, there is more money parked in the Starbucks loyalty program and in gift cards than at some small community banks.

WISNIEWSKI: They're creating loyal customers and keeping them. What's that word everybody loves in business, man? Sticky?

WONG: Sticky.

(LAUGHTER)

WISNIEWSKI: I hate it, but it's used often.

WONG: (Laughter).

WISNIEWSKI: I mean, it's like, your money's there. You're going to keep going. You're going to keep buying things. And it's, you know, bank-like for a specific coffee shop.

WONG: That sounds super niche. But then I think of a company like General Electric. In the 1930s, it started a lending program to help consumers buy home appliances. By the early 2000s, this division was one of the biggest lenders in the whole country. And this expansion into financial services was really lucrative for GE. It accounted for half of the company's profits at one point.

WOODS: Wow. So GE became this bank that happened to make washing machines. So does this mean that one day, Apple will be a bank that happens to make computers? Or is Starbucks is going to be - I don't know - the you big credit card issuer that happens to sell coffee?

WONG: Maybe. You'll have to stay tuned for the next installment of Is This A Bank?

WOODS: I can't wait.

(SOUNDBITE OF MUSIC)

WONG: This episode was produced by Brittany Cronin, with engineering by Robert Rodriguez. It was fact-checked by Sierra Juarez. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.

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