In spite of two interest cuts made by the Fed this year, those looking to deposit assets into high-interest savings accounts seem to be multiplying. The reason for this frenzy amongst the financial sector is the digitisation of the market.
In recent years, new digital firms have been unsettling the traditional banks, making those who once had an authoritative voice with a large and stable market share, scramble to keep up with the new kids on the block in an attempt to retain their fleeing customers.
In a crowded market, new fintech companies are partnering up with small banks to diversify, and offer consumers something a little different from the big banks, testing customer loyalties to their limits.
Perhaps unsurprisingly, 65% of millenials have used online banking 72% have used mobile banking, according to research found in the U.S. Financial Health Pulse report.
Additional digital services and easy-to-use apps that were once a differentiator are now expected from both sides, but seems the big banks have finally caught up to speed with their digitally-savvy consumer’s needs.
The one key difference is the customers ability to shop around for the best rates and deals, and their willingness to bank with multiple firms simultaneously, both online and traditional brick and mortar retail banks. This means they can take advantage of the best deals on the market all at once.
These deals seem to be mostly introductory and expire after a year or so, it will be interesting to see whether these new firms can hold onto customers long after the special offer that lured them in is over and what their longterm strategy is to maintain a foothold in the market.
Where the big players have a distinct advantage over these digital-first newcomers, is their ability to scale technology fast with mass exposure.
An example of that is multinational investment giant, Goldman Sachs, who has built a robo-advisor. The Robo, which has not been clearly defined yet, is currently waiting in the wings to be launched.
The automated advice platform would be Goldman’s first digital product to serve the smaller investor segment. The firm confirmed it has been built and will help human advisors manage the smaller clients their currently struggling with.
We don’t yet know whether this product will be digital-only, such as mutual fund giant, Vanguard, or a hybrid of an algorithm and human advisor effort.
Goldman Sachs, has recently acquired a few fin-tech companies, suggesting their shift to digital is very much being taken seriously at the company’s helm.
The figures clearly show why digitisation is so important, research from Aite Group found that Robo advice fuelled a boom in new discretionary accounts that reached 27 million in 2017, rising from 15 million four years previously. Assets on digital platforms are predicted to exceed $1.26 trillion by 2023.