UK FCA Chastises Banks for Low Deposit Rates, Meanwhile Wise Trounces Banks with Higher Savings Rates

The UK Financial Conduct Authority (FCA) has commented on the rate spread between what banks are receiving in interest rate returns and what they are giving their deposit holders.  The regulator said in a studied, underwhelming tone that the “decision-making has been slow” for banks in adjusting rates.

On the other hand, Wise (LSE:WISE), a Fintech that started as a money transfer provider that is now looking more like a bank, took the opportunity to pound their chest a bit, displaying a comparison between old fuddy banks and what Wise is offering.

Wise founder and CEO Kristo Käärman noted that the Bank of England’s rate is 5% while high street banks are paying up to 1.75%. A really big spread. Wise is the outlier paying out 4.22% for its deposit holders – a far better proposition for savers.

Käärman said there is a better way than asking banks nicely to slash their profits by doing what is right. Competition is what is needed, and that is what Wise is providing.

Part of the problem is consumer inertia. Customers, especially older ones, are loath to move their money from one bank to another – especially one they have used for years.

But with a spread like this, it is pretty hard to ignore the gouging banks are inflicting on their customers. That, and the fact that Open Banking is making it easier to transfer accounts, will hopefully compel banks to offer a better service. Otherwise, traditional banks are creating a big opportunity for more agile firms, like Wise, to gain new customers.

Meanwhile, the FCA is expected to provide a report by the end of this month on how the savings market is doing. You may expect little change.

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