Online Savings – The Bank’s Perspective
With people cashing in on the high interest rates offered by online saving schemes from the likes of HSBCDirect and ING Direct, one may ask if the banks are really reaping profits from them. Having burnt their fingers earlier in the 1990s when banks had introduced standalone Internet banks that paid high rates on checking accounts, the first bank to take up this initiative again was ING when they introduced their Orange account in 2000. True, banks lose out on the high interest rate they promise, 4.69% versus the 0.54% in ordinary savings accounts but what they do garner is customer acquisition. Also, their brand name spreads to places where they may not even have a branch. The Federal Reserve also has a role to play in this trend, because when they up the rates, banks will follow too. More on this story here.