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What the BoE interest rate decision means for the future of savings

Today, the Bank of England (BoE) announced its latest decision to hold interest rates at 0.1%. While this move is not a shock, it leaves little hope for the consumers wanting to grow their capital. So what does this decision mean for the future of savings? As it turns out, our newly launched Fintech PR Playbook has some answers.

As we highlighted, the UK is living through a long stretch of record-low interest rates, which has put a big strain on an already struggling savings culture. In addition to this, a perfect storm of social, political and economic factors including the rise of consumerism, the widening availability of credit, as well as the loss of trust in banks and other financial institutions, has transitioned the UK from a nation of savers to one of debtors. 

One positive outcome of COVID-19 is the potential reversal of this trend once again, according to Natwest, with more consumers holding on to their cash for fear of economic uncertainty. However, with interest rates sitting at an eye-watering 0.1%, consumer attitudes towards saving for personal, financial gains are still discouraging. And this is expected to continue throughout this year and potentially beyond. 

The global economy will almost certainly take a severe hit from COVID-19. According to a new report from Unlimited Group, Winter is Coming, we’ll see an estimated 6% contraction in 2020. There have been considerable debates concerning the speed of the world’s economic rebound, with the more optimistic thinkers looking towards the end of 2020. However, the more pessimistically-minded are predicting global recovery to occur as late as the end of 2023. This could mean that low – and potentially negative – UK interest rates are here to stay.

The good news is that economic dips often bring with them great opportunities. In fact, the first wave of Fintech was born out of the 2008 financial crash, which proves the sector’s ability to adapt and thrive during a downturn. In our current crisis, Fintechs have a clear opportunity to disrupt savings with innovation.

In recent years, we’ve seen a lot more players flooding the marketplace, often offering better interest rates than those offered by banks. For example, Marcus by Goldman Sachs has provided consistently competitive rates for savers, while start-up Zeux announced its offer of 5% interest rates at the start of the year. But besides better rates, Fintechs have made it their mission to get the nation saving again – with the likes of Monzo encouraging customers to Save at Home by moving extra funds saved into a new savings pot. 

So while the economic outlook is seemingly bleak, there are many reasons for Fintechs – and consumers benefiting from their services – to be optimistic. Saving remains a key area that is ripe for disruption, so we can expect to see new and improved offerings continuing to flood the marketplace. As we move through economic recession and look towards life after the pandemic, Fintechs can help the UK become a strong nation of savers once again.

Nick Chiarelli, Head of Trends, UNLIMITED Group

Tags: fintech, savings