7 On Your Side: Mobile banking system founder says you can keep more money in your pocket

SAN FRANCISCO (KGO) -- Have you ever noticed how little interest your deposits into your bank are making? Major banks are paying .01 percent right now. 7 On Your Side's Michael Finney tells us you may soon have an alternative.

A completely new mobile banking system will be accepting deposits for the first time this month. Its founder tells us, he'll pay you as much as 400 times what most banks are paying you for your money now.

Beam Founder, Yinan Du, reveals what he calls the biggest secret in banking. The Harvard Business grad says banks are loaning out your deposits to make money.

"They're borrowing from consumers, and lending it back to consumers. And what we're talking about here is the rate gap," Du said.

You will see in my story above, a scenario I created. Here's how it works, "I'm going to play the bank. Isabella is my customer. Isabella deposits 10,000. Me, the bank, is going to pay him .01 percent interest. After one year, that money would earn Isabella, $1. Kayla comes to me to borrow money. I'm going to give her a one year loan of $10,000 and charge her 6.7 percent. The difference between the interest I charge Kayla, and the .01 percent I pay Isabella is my profit - $369."

Du says banks make on average 5 percent for every $1 you deposit. The low-interest depositors earn, troubles Yesenia Garcia.

"It's bothersome to see, instead of watching my money grow, it's really just depleting. I keep funneling money into it, and I don't see the fruits of my labor," she said.

A new San Francisco company called Beam says it will pay you anywhere from 2 percent to 4 percent interest.

Mobile only, Beam has no physical branches, a minimal number of employees, and doesn't advertise.

Yinan Du says, "A lot of those costs can be saved, and be able to pass to consumers to that, you can keep more money in your pocket."

Beam is not a bank. It just collects deposits for a small regional bank, which it has yet to disclose, but is federally insured.

Not knowing which bank makes Andrea Luqueta of the California Reinvestment Coalition, uncomfortable.

"I'd like to know. I think most people would like to know who they're doing business with," she said.

But Yesenia says, that doesn't bother her and other millennials.

"Millennials are someone that would be receptive to it because we are willing to take risks for the promise of change."

Right now 33,000 people are on Beam's waiting list. The company will allow a limited number of those customers to make deposits beginning November 15. The maximum deposit allowed will be $50,000.

Click here for more 7 on Your Side stories
Copyright © 2021 KGO-TV. All Rights Reserved.