New research from Investec reveals that the coronavirus crisis has accelerated the trend of people using online based savings accounts as opposed to postal, branch or phone-based ones. Of those people who have opened a savings account this year – with some choosing more than one type – 79% chose a digital or online based one, 14% selected one they could manage through a branch, 11% chose a phone based one and 5% opted for a postal account.
Nearly a fifth (18%), said they chose not to open a branch-based savings account as they wanted to avoid visiting branches to reduce the chances of catching COVID-19. Last year the Covid-19 lockdowns and furlough schemes prompted a wave of savings to move into Premoujm Bonds, as savers watched interest rates plunge to around 0.5% on Instant Access accounts. At least with Premium Bonds there is the chance of winning £25/£50 a few times a year.
Since March, 135 savings accounts have been launched, and 73 (54%) were online only. Just 13 (9.6%) were branch-based accounts, with three (2.2%) post only, and 46 (34%) offer a range of channels to use to manage their savings.
Investec has published the research following the launch of its new instant access savings product, the Online Flexi Saver. This offers unlimited deposits and withdrawals, a competitive interest rate and no bonus or introductory rate, so savers have complete transparency over their interest rate.
Reasons for selecting online based savings accounts
The main reason for selecting an online based savings account was that they generally offer better rates – this was the view of 55% of those who have opened an account this year. However, 24% say it is because since lockdown, they have increasingly been using digital tools such as apps to manage their money, and now feel more comfortable managing their savings online. One in five (18%) say it was because they don’t want to go to a branch because of the risk of catching COVID-19, and 12% say it was because more branches have closed due to the crisis.
Despite the huge financial strain the crisis has placed on many households, 19% of people say they are saving more into their savings accounts, compared to 22% who are saving less. When it comes to saving into the accounts of loved ones, 13% are putting aside more than they were before the crisis, and just 14% are saving less.
Of those who are saving more, 76% say it’s because the crisis means they are spending less, but 16% say COVID-19 has made them think more about their future. One in ten (10%) say they are saving more because they are worried about their job moving forward, and 10% because it has made them think more about their loved ones, so they are saving more for them. Some 16% say they are saving more because their earnings have increased during the crisis.
Linda Brown, Head of Savings at Investec, said: “It’s clear that the Covid-19 crisis has accelerated the use of online and digital platforms, but this is a continuation of a trend we’ve seen among our own client base in recent years. It’s becoming more and more important for people to be able to interact digitally with their savings products as it provides a slicker experience that puts the client in control, particularly at times when freedom of movement and access to branches is restricted.