FinTech has ‘huge potential’ to break UK savings inertia, industry leaders say

FinTech has the power to unlock billions of pounds of extra interest for savers and cure the inertia plaguing the market, industry leaders say.

In a round table hosted by Flagstone, the UK’s market-leading cash deposit marketplace, senior figures in the savings market agreed technology could incentivise savers to shop around for better rates.

There was also a suggestion that the savings market could transition towards an intermediary-led model similar to the mortgage industry, where the majority of new business is generated by introducers.

The predictions follow a major report from the Centre for Economics and Business Research (CEBR) revealing savers could earn up to an extra £7 billion a year by switching to a leading savings account.

A survey of 4,207 UK adults, conducted by YouGov as part of the CEBR study revealed why UK savers no longer shop around for better rates in the way they did before.

More than two-fifths (42%) of respondents stated that an interest rate differential of 1 percentage point or less would persuade them to switch accounts.

Given there is already at least a 1 percentage point difference between the market-leading and lowest-rate instant access accounts, it suggest savers are not fully aware of the interest rates available, or that other factors are over-riding consumers’ desire for higher returns.

One such reason, cited in the YouGov survey, was the complex and time-consuming application processes associated with opening new deposit accounts.

However, participants at Flagstone’s roundtable agreed that technology – and in particularly cash platforms – were key to breaking the widespread inertia in the UK savings market.

Adrian Mawson, Commercial Director – Banking at comparison site Moneysupermarket, said:

“For us, the savings platform arena is still some way from mass-market but we believe technology, and in particular cash platforms, has huge potential to unlock the inertia we are seeing in the savings market at the moment.

“Aside from low rates, people are often put off by the length of time and the complexity of switching their savings, so anything that makes that easier could give people the incentive they need to shop around for a better deal.”

Paul Emery, Head of Client Banking at St. James’s Place Wealth Management, said:
“Cash is a high growth area for wealth managers and it will continue to be so. If platforms can integrate themselves into the offerings of wealth managers, banks and comparison sites, they will really take off and you will find wealth managers increasingly looking to place that cash on behalf of their client. That could well act as an antidote to the inertia seen in the market at present.”

Darren Bailey, Head of Product Management – Savings at Nationwide, said:

“Over time, enhancements in technology could result in a greater number of consumers using Platforms and other intermediaries to manage their Savings. In the mortgage market, nearly c.75% of business is generated through introducers – the question is whether the Savings market follows a similar trend?”