Vanguard could 'flip narrative' as key poach of Ally Bank exec positions it to meet 'overwhelming demand' for debit card, and finally stop acting like stodgy ETF company

The Vanguard Group is making amends – with a vengeance, and a dose of humility – for rashly killing off companion bank account services seven years ago. 

The Malvern, Pa., asset giant is now hinting that a conspicuously absent debit card is finally on the way. 

It even put aside buttoned-up cultural biases by hiring two former Ally Bank executives with the skills and playbook to get it right this time. See: Vanguard aborts banking effort.

“My take is that Vanguard's new debit card closes a capability gap but is really a feature launch, not a transformative business driver," says Will Trout, director of securities and investments and Datos Insights.

"While it completes their household cash-flow stack, adoption will be gradual, as 500k Cash Plus users is small compared to VG's retail client base.”

Vanguard junked its prior debit and checking service, which it had for 15-plus years – in early 2019, a victim of falling outside of “core capabilities," it said at the time. 

It only offered the services to customers with $500,000 or more, and 98% of them took a pass, in part because cash yields were plummeting under rate-cut pressure. 

This time around, Vanguard is offering all client segments the cash accounts and bringing in domain experts to make it happen.

Playing catch-up

Vanguard hired heavy-hitter Sonia Fraher last March from Ally Bank to serve as its head of cash management. 

In her last job at Ally, Fraher was senior director, consumer product strategy, which she held for last 21 months of her tenure. In all, she spent 19 years and nine months at Ally, with a mission to “differentiate.”

She "created and led" a business unit to develop, launch, and own differentiated features “across lines of business,” her LinkedIn profile states.

Now, Fraher says she is playing catch-up to meet pent-up investor demand.

"We have received overwhelming demand for a Cash Plus debit card, which is why we decided to actively explore this offering," she says.

Staffing up 

Vanguard's confirmation follows Ignites' Apr. 15 report that the fund shop has hired former Stearns Bank digital banking executive, Adam Gill as its new director of debit card and money movement. 

Gill spent 20 months at Ally Bank in the 2020-2021 time frame. Gill's LinkedIn profile states he is now working "to launch [a] debit card and modernize" Vanguard's cash accounts.

Vanguard is also hiring executives to support Gill, including a senior specialist in product management for its debit card program – a role yhat includes leading "delivery of Vanguard’s Debit Card Program, from concept through launch and scale," it states, in an April advertisement.

Competitive pressure

It's about time, says Jeff DeMaso, editor of the Independent Vanguard Advisor, in an email exchange.

The lack of a debit card – and services like the automated investing of surplus cash, and fully fleshed out bill pay – has limited Vanguard’s ability to grow wallet-share among retail cash clients, he explains.

“Competitive pressure, and the desire to have 100% of a customers wallet, drove Vanguard to reverse course and re-introduce a cash solution … [and] the addition of a debit card would start to change the math," he says.

“The lack of an ATM card and checkwriting has been a dealbreaker for me, [but] if Vanguard closes those gaps, Cash Plus starts to look a lot more like a complete cash offering."

The humble debit card is, for Vanguard, attracting new clients in a world of neo-banks and robo-advisors – never mind Schwab and Fidelity, which have had these capabilities for decades.

It had about 500,000 investors using its Cash Plus account, as of Apr. 20. It launched the service in 2024.

"The [cash account] has already seen impressive adoption and growth, with more than 500,000 accounts opened, [including] a significant portion opened by clients who didn’t previously have a relationship with Vanguard," Fraher says. See: After many beta tests, Vanguard finally launches bank cash product for non-Vanguard investors, a U-turn but also likely thorn in the side of Schwab, Fidelity.

 Although designed to act like a checking account, it hasn't offered a direct Vanguard-issued debit card or ATM services. Accouints, however, can be linked to third-party apps like PayPal or Venmo.

Trojan horse

A debit card – adopted by mainstream bank for retail purchases in the 1990s – and table stakes at Fidelity Investments and Charles Schwab & Co. since the early 2000s, still faces the same hurdles that led to its previous slow buildout and shuttering, says Trout.

Slow adoption of a low-margin service means that Vanguard will likely only make debits cards succeed by using them as a loss leader or “trojan horse.”

“Debit-cards are a low-margin business; value emerges only if Vanguard drives primary household banking adoption and deeper deposits,” he explains.

Flipping the narrative

That's to say that if Vanguard's real play is using the card as a trojan horse to capture primary banking relationships (deeper deposits, checking account adoption, etc.), then the card's weak unit economics don't matter.

Though the debt card is one small step for banks, Vanguard could leverage it with marketing to flip the narrative that it is digitally inept, Trout adds.

“If Vanguard positions the debit card as closing the integration gap (complete household brokerage, plus cash, plus spend, no app-switching), then the narrative flips… The ‘boring ETF company’ now offers what the cool kids promised.

"That's potent advertising fuel and defensible against competitors who excel at one thing but not the suite.”

Advantage Vanguard

Vanguard is doubling-down on retail cash management because it could establish a competitive retail advantage over traditional discount brokerage rivals like Fidelity and Schwab, which offer checking accounts with debit cards, but lower interest rates – much lower in Schwab's case.

Schwab's checking account offers 0.01%, and its savings account offers 0.15%; Fidelity offers 1.84% through a deposit-sweep, or 3.29% through an opt-in money market fund. 

Vanguard's cash account offers 3.35%, including a temporary 0.25% bump, until September. If clients opt-in to a money-market fund service, it offers 3.38%. 

“Vanguard remains intentional in the development of our Cash Plus Account and overarching cash management offer – helping clients earn more interest on their savings, which often were held in low-yielding accounts elsewhere,” says Fraher.

“Our Cash Plus offer is distinctly different from any prior [Vanguard] solutions in a variety of ways, including access to a wider base of savers and [it is] driving significantly higher engagement … [and] we continue to build capabilities based on direct client feedback … including exploring the addition of a debit card," she adds.

Strategic blunder

When Vanguard junked its last cash account, Vanguard Advantage, seven years ago, it claimed the accounts, limited to clients with over $500,000, were not its core strength.

"We're constantly making sure we're pivoting and offering products and services that are our core strengths," Vanguard spokeswoman Emily Farrell told the Wall Street Journal, at the time. Farrell left Vanguard in late 2024.

The decision drew criticism even then. See: Vanguard is now several months into beta plan to offer head-turning, high FDIC-insured yields and capacity after 2019 scrapping left it flat-footed against Schwab and Fidelity.

Trout, then in a similar role at Celent, described the move as "reverse to the trend," in a 2019 email.

It was a blunder, says DeMaso. 

"If we want to be charitable, the timing of Vanguard's decision to shutdown Vanguard Advantage was unlucky. 

“The less charitable interpretation would be that they got that strategic decision wrong. They shutdown their cash account just when those were about to pick up in popularity,” DeMaso adds.

Changed tack

Yet, Vanguard has clearly learned a lesson, namely that it needed to target its cash accounts far more broadly.

“Cash Plus, which is available to anyone, has no cost to open an account and no minimum balance requirements,” says Fraher.

Its improved capabilities go wider than a mooted debit card, she adds.

“Clients are enthusiastically adopting the features that allow them to use Cash Plus in their everyday lives, including next-day bank transfers, a routing number for bill pay, mobile check deposit, direct deposit, and compatibility with apps like Venmo and PayPal."

Success, however, will depend on how much of the day-to-day Vanguard can really handle, says DeMaso.

"With Cash Plus, as it stands today ... it doesn't replace my checking account, which means it doesn't simplify or streamline my financial life," he explains.

"I [also] long ago solved for the fact that my checking account doesn't pay any interest by using a money market fund, [and] Cash Plus isn't better than Vanguard's money market funds,” he concludes.

More needed

If Vanguard is serious about competing in cash, it still has a lot to get right, especially when Cash Plus is compared to more millennial and Gen-Z tailored services offered by Wealthfront Betterment and Robinhood.

Robinhood currently offers interest yields of 3.5% to 'Gold' members, and 0% otherwise; Betterment's current account yields 0%, but its savings account offers 3.25%, and a 0.65% boost for a saver's first three months; 

Wealthfront offers 3.3%, with a further 0.65% three month boost, and an extra 0.25% for regular savers.

Vanguard's long-term cash management target is “younger investors, but if they're comparing Vanguard to Wealthfront, Betterment, et al., the competitors have "better,"more functional cash accounts

"A debit card would make Vanguard's value proposition stronger,” DeMaso explains.

“For me, success would be turning Cash Plus into a fully functioning cash solution, [which] means debit card, check writing, seamless and reliable bill pay, and the plumbing needs to be linked up to all account types."

Financial gateway

DeMaso adds that he found it impossible to set-up an automatic investment through Cash Plus that would add funds each month to his Vanguard brokerage account. He ended up setting it up through Schwab instead.

“I want Cash Plus to be the gateway of my finances – the point where money comes in and out. It can't fill that role today,” he concludes.

Such modernization is Vanguard's new banking hire's specialty.

Gill spent just under two-years at Ally Bank, running product development for deposits and debit card, a year at an undisclosed neo-bank start-up, and 44 months at Stearns, most recently as its head of digital banking and deposit product management.

At Stearns he had a mandate to “enhance operational simplicity, and eliminate friction,” according to his LinkedIn profile.

For now, just 17% of Americans prefer to use digital debit options, which include digital debit cards stored on a mobile phones or wearable devices, according to the study.

* Vanguard does not break-out what percentage of its 50 million clients are based in the US, although multiple estimates state that the US is far and away its largest market, as well as its oldest and most lucrative.