There is a savings crisis in America; half the population has less than $500 in a savings account, and 80 percent of Americans report that they live paycheck to paycheck. Some fintechs have responded to this and successfully lured some deposits away from traditional banks by offering high-yield savings accounts in an attempt to win new business. Some of these digital accounts feature interest rates upward of 2% APY and above – much higher than the interest rates offered in a typical bank savings account. And for cash-strapped Americans, parking your money in an account where it will work harder for you is is quite appealing.
In response, some banks are trying their hand at digital savings accounts that also feature budgeting tools and other PFM-like functionality. Interestingly, it’s not only the large global banks doing this, but many small-to-medium-sized banks, which are partnering with fintechs to offer high-yield savings accounts and goal-oriented apps to improve customers’ financial health. With all the bad news circling tech these days, this is one example of technology innovation creating a better environment overall for consumers.