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The launch of a new service by a UK digital bank comes while high street competitors offer more modest hikes.
Chase, JPMorgan's digital bank, has introduced a new UK savings account with a 1.5% return, surpassing high street competitors offering better bargains following the Bank of England's rate hikes. UK savings are under pressure as inflation touched a 30-year high of 6.2 per cent last month, with further increase expected in April as regulated energy costs increase and as the Ukraine crisis increases fears about the price of gasoline and other commodities.
“With the cost of living increasing, we know that consumers want to maximise the interest they can earn with the reassurance of being able to access their savings instantly,” said Shaun Port, Chase’s UK managing director for savings and investments.
Chase's new quick access account, which is connected to the digital bank's current account, allows savers to deposit up to £250,000 in total and access it at any time. Customers may open up to ten distinct savings accounts.
“This is clearly a carrot from the digital bank to try and drive new current account openings and in the current market l expect it will be swamped with applications,” said Andrew Hagger, a personal finance writer at Moneycomms.co.uk.
Other institutions are expected to increase savings account rates next month, albeit not by the same amount. The rate for Lloyds Bank and NatWest quick saver accounts will increase from 0.01 to 0.1%, however some products may see higher rises. While Chase does not demand a minimum income to open a current account, it does require smartphone access and presently does not provide joint accounts, according to Hagger, possibly excluding certain consumers.
“Let’s just hope that the rate is more than a short term incentive that then gets cut just a few months down the line,” he said.
JPMorgan established Chase in the UK retail market last year, the company's first international retail bank in its 222-year existence, in contrast to Goldman Sachs' choice to start consumer bank Marcus in 2018. At the time of its introduction, Chase provided only current accounts with a rewards program. With its vibrant fintech culture and well-established payments infrastructure, the UK retail sector has been an ideal test market for US banks looking to extend their digital products. Open Banking rules, which are intended to offer customers more control over their data, should theoretically make it easier for them to move banks.
Last month it was reported that Chase's plan to compete with digital competitors such as Revolut, Monzo, Starling, and a slew of high-street brands has raised eyebrows, particularly at a time when rivals such as Citigroup are consolidating their worldwide businesses. The attempts of large banks to develop digital brands have met with varying degrees of success. JPMorgan's initial venture, US bank Finn, failed after just one year. NatWest's in-house digital bank Bó was shut down in 2020 after a brief existence of less than six months. Inflation is now predicted to reach 8% by the end of June, escalating concerns about the impact on the cost of living. The Bank of England increased its key interest rate from 0.5% to 0.75 percent earlier this month.
By fLEXI tEAM