He who has so little knowledge of human nature as to seek happiness by changing anything but his own disposition will waste his life in fruitless efforts — Samuel Johnson
The world of banking and financial services is at an inflection point. In addition to pureplay digital banks such as Ally, Marcus by Goldman Sachs, broking and investment platforms such as Robinhood and Wealthfront have joined the race to offer high yield digital savings accounts.
As banks becomes more digital and therefore homogenous, every bank must rediscover that which is its core competency and then build a platform around it. Also, the competitor set for banks is not just other banks rather it is any technology company on the planet. This article looks at the evolution of banks as a platform and banking as a service. It also provides strategies for banks to differentiate and to break away from a pack where the very definition of that pack is in question everyday.
The Implications Of A Price War
Predictably, after players such as Ally Bank, Goldman Sachs and others, Wealthfront announced a high yield savings account which yields 2.24% to depositors. All this while, Robinhood is contemplating a relaunch of its own high yield savings account which it had to withdraw amid a snafu with deposit insurer and miscommunication to prospective clients in December 2018. It is now officially a rate war to mop up savings in the United States . As the Federal Reserve attempts to hold the interest rate steady, thees is another issue which the Federal Deposit Insurance Corporation (FDIC) is contemplating — the extra insurance paid by so called ‘brokered’ deposit originators. Brokered deposits are deposits gathered by means other than in a branch e.g. digital deposits.
As per American Banker : ‘Under current FDIC rules, banks often pay a higher price for deposit insurance if so-called brokered deposits make up more than 10% of their total deposits’. A debate over a change in these rules not only has larger implications for a branch network but is also the biggest indicator that banks may…