© 2019 Cambrian Ventures, Inc.

San Francisco, California

  • Rex Salisbury

Idle cash is a huge problem, Automated tools like Betterment's Two Way-Sweep are part of the answer

Updated: Apr 22, 2019

These are my reflections on Bob Manix-Cramer presentation at our April 2019 meetup in NYC. As a Group Product Manager, Bob leads the teams responsible for building Betterment's client experience on web and mobile apps. You can watch his presentation below. You can also read more about Two-Way Sweep here.



Idle cash is one of the largest problems that investors face today and is often less talked about than the problem of high fees. To put things in perspective. There are:

  • $10 trillion in consumer deposits

  • $8 trillion in mutual funds.


If you are overpaying for your mutual by 1% (which is typical), American investors are losing out on around $80 billion a year due to those fees (rough numbers here).


In comparison, your idle cash is likely earning 0.01% interest instead of around 2.25% from best in class accounts. So Americans are missing out on 2% of $10 trillion, which is $200 billion a year.


$200 billion is greater than $80 billion, making idle cash a BIG problem. What is surprising is that a lot of consumers know that they have idle cash and are not being appropriately compensated. So why don’t they do something?


The Promise of Automation


The answer is that it’s kind of a pain. Transferring your primary deposit relationship to a new account is a hassle. Moving money between multiple accounts is a real pain (something I personally experience on a monthly basis). ACH is slow and digital transfer limits are low. So the reality is that even though consumers know they are losing, they don’t do anything.


What’s the answer? The answer is automated tooling to move cash to its highest and best use and that is precisely what Betterment’s two way cash sweep does.


Such automated tools are in their infancy, at Betterment their cash accounts hold “hundreds of millions”, while their total AUM is $17 billion, and remember there is around $10 trillion of idle cash in the US.


As the prevalence of automated tooling grows the days if idle cash are numbered. This will have interesting implications for the rest of the financial system. Large banks exist and compete in part because they have they cheapest source of funding, consumer deposits, for which they pay a pittance. When banks start having to pay higher rates that will impact their business models in interesting ways and could create interesting knock off effects for the rest of the ecosystem (and opportunities for fintechs I might add).