When money leaves accounts, it’s gotta go somewhere – if not for a transaction, then to another account.
It’s no secret that investors like yield. So do folks who park their money in savings accounts. The last several years have been lean ones for those who want yield gleaned from traditional deposit accounts. Rates have risen recently, albeit off a historically low base. Over the last several months, the Federal Reserve has hiked up rates, which means banks follow suit, and charge more for money they lend out. At the same time, rates paid out on savings also go up, although in a lagging fashion.
Some traditional financial institutions may be seeing money movement – but perhaps not the kind they like. News came this week that in one example, JPMorgan Chase is seeing a slowdown in deposit growth, as some consumers are shifting funds away from that traditional banking company, and opting for banks that offer higher rates.
Gordon Smith, COO, took note of the migration, stating that these customers are parking money with high-yield competitors, “whomever they may be,” as reported in Reuters. Yet he contended that most of these customers will still opt to keep Chase as their main institution.
However, as noted by some research from Nerdwallet conducted on behalf of USA Today, across more than 2,000 adults, 21 percent have transferred funds to online banks that pay at least 2 percent interest. That’s up markedly from the 6 percent tally that had funds with online firms, such as Ally, E-Trade or Discover. The average bank has been paying just about 10 basis points on savings, according to Bankrate.
The sample may be small, but there are other anecdotes, too, that online banking – and its relatively higher rates on deposits – has been gaining traction. As noted in past earnings calls for Goldman Sachs, Marcus, its online bank offering, logged $35 billion in deposits last year. As of the latest quarterly report, the firm said deposits across the U.S. and U.K. stood at $46 billion.