The arrival of Revolut in the savings market introduces refreshing competition. Despite the presence of other international digital contenders, Revolut’s substantial existing clientele of around 2.7 million allows it to pose a more potent competitive challenge. It is likely that its established relationships with customers familiar with its mobile application will enable it to poach clientele from major banking institutions.
Irish banks traditionally offer disappointing returns on demand accounts, which is the sector Revolut is targeting. Major local players have seen significant growth in their savings deposits in recent years, now surpassing €150 billion. A substantial amount of this is deposited at the ECB, where 4 per cent overnight rates are offered, making this a profitable venture. Many households refrain from shifting their money from low-interest demand accounts.
Although Irish banks have raised the returns on term and notice accounts, interest rates on demand deposit accounts are still considerably below the average across the Eurozone. Revolut offers tempting rates, starting at 2 per cent. However, these elevated rates are only accessible to those willing to pay a monthly plan fee to Revolut. Therefore, Irish households need to make an informed decision on the best course of action for them. The domestic entities offer reasonable returns on notice and fixed-term accounts.
The extent to which business would be affected and the reaction it would elicit from domestic entities remains to be seen. After all, these entities don’t feel the need for additional deposit cash currently to fund their loans.
Nevertheless, the surge in competition is a positive development. Even though a unified banking market is still a thing of future in the Eurozone, deposit protection of up to €100,000 applies to personal savings across all banks in the Eurozone. The strategic moves by Revolut and other international digital competitors underscore the functioning competition as they identify an opportunity to gain a share where local entities are presently capitalising. As always, customers must carefully assess the best place to park their savings according to their specific requirements.