What could JP Morgan’s new digital bank pay British savers?
The new bank set to be launched in the UK by JP Morgan Chase over the next few months could upend Britain’s current account market but is unlikely to be a saviour for savers, experts have suggested.
The world’s seventh-largest bank has hired 400 people and is preparing to launch an ‘innovative’ app-based bank in a bid to emulate the success of British challenger banks like Monzo and Starling.
But while details about the bank’s offer have remained largely under wraps, its plan to launch a current account first is a blow to savers hoping it would have the same impact on stagnant savings rates as fellow American import Marcus.
JP Morgan is launching a UK bank under the name of Chase later this year
The Goldman Sachs-backed bank launched in September 2018 with an easy-access account paying 1.5 per cent, which ‘added 0.1 percentage points to the best buy rates at launch’, according to James Blower, founder of The Savings Guru and an adviser to savings banks.
‘The JP Morgan news clearly shows the initial plan is to enter the current account market and not savings first’, he said.
He expected any savings accounts to be launched later this year which, he said, ‘isn’t great news for savers hoping for a similar boost from Chase as they got from Marcus.’
One savings boss at a challenger savings bank echoed this. ‘I don’t think this will be Marcus version 2’, he said.
The 1.5 per cent offering was so successful it saw Marcus snap up more than half a million customers who have together poured in £21billion, a sum which has forced it to close its doors to newcomers at the risk of breaching British banking rules, which would require it to ring-fence its UK deposits.
It has been slow to add to that proposition, with only a one-year fixed-rate bond paying just 0.4 per cent currently launched since and no sign of any tax-free Isas yet, despite it hiring for an Isa manager last year.
It does plan to launch an investment platform in the UK in the second half of 2021.
However, even if the latest American entrant to Britain’s banking market launched a current account first, there could be ‘competitive’ savings deals to come in the future as it looks to fund lending, even if they might not necessarily be the best offers around.
Goldman Sachs’ Marcus Bank has taken in £21bn in deposits since it launched in September 2018. The launch boosted slumping savings rates at the time
The unnamed banker said: ‘I suspect they may initially launch with some competitive savings deals to gain a foothold, raise awareness and drive positive brand association pending the launch of their current account.
‘They will learn the lessons from the Marcus launch and will probably have a range of fixed-rate bonds, easy-access accounts and Isas, although they’ll be unlikely to launch all of them immediately.
‘I think they’ll be competitive but not to the degree we saw with Marcus.’
In the US, Chase, which counts nearly half of American households as customers, pays savers just 0.01 per cent on deposits.
By contrast Marcus, which remains a relatively new entrant into the…
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