A battle royale for online deposits
An online war is underway for deposits, as a wide range of players — traditional wealth managers, big banks, digital-only platforms and fintechs — offer high-interest savings and checking through apps and websites.
Competition has hit a fever pitch, despite the Fed's two interest rate cuts so far this year. With assets pouring in to high-yield savings accounts, financial advisors who find the right mix of products can help clients take advantage of competitive annual percentage yields.
Competition has hit a fever pitch for several reasons despite two interest rate cuts by the Fed this year. With assets pouring in to high-yield savings accounts, financial advisors that find the right mix of products can help clients take advantage of competitive annual percentage yields.
Digital firms, trying to build up market share and form new bonds with clients, are paying far more than traditional banks have in recent years. Yet commercial banks prize deposits, too, to fund loan growth and use as a base to cross-sell other services.
Meanwhile, more fintechs are entering the fray — either startups or existing players seeking to diversify beyond personal financial advice, investment or other services. The increasing number of partnerships between fintechs and small banks has crowded the market further.
With more choices out there, customer loyalties are shifting, as some retail consumers switch banking relationships — or do business with multiple companies — in search of lower fees and better overall rates.
Digital-only firms first sought to outmaneuver traditional banks with a marketing message of convenience, simple account opening, lower fees and higher interest rates on accounts. But traditional brands have responded by offering their own digital banking options.
Here is a breakdown of six drivers of the online deposit fight, and a big caveat about the offerings: Not all these accounts are alike. Differing requirements and limitations lie in the fine print, reflecting the strategies of the institutions offering them.