The peer-to-peer lender said banks are taking advantage of customers unwillingness to switch between savings accounts by offering the lowest rates to long-standing customers.
Peer-to-peer lender Crowdstacker is launching a new savings product that automatically moves account holder’s cash between banks to get them better interest rates.
The London-based start up has called its new product Kepe, and hopes it will chip away at the inertia and confusion that stops savers switching between savings accounts that have collectively cost them £800m since September 2018, according to the consumer body Citizens Advice.
Crowdstacker said: “Kepe plans to do for people’s cash savings and cash ISAs what auto-switching has begun to do for household energy bills. It removes the need to manually search for, and switch to, new accounts once initial preferential rates have expired.”
The lender said customers will be able to sign up to a Kepe account, just once, and from then on their money will be automatically moved to different savings accounts best suited to meet their specific savings needs and offering the best rates available to each saver.
‘Panel of banks’
However, account customers will only be able to switch between banks that have signed up to the lender calls its “panel of partner banks”.
CrowdStacker would not reveal who the banks are on that list or how many firms it has signed up.
A spokeswoman added that “traditional and challenger banks represented on the panel at the moment”, adding that the list would be revealed “when Kepe is open for deposits later this year”.
Citizens Advice lodged a super-complaint to the Competition and Markets Authority (CMA) last month about long-term customers paying more for goods and services, adding that savers have lost out on more than £800m of improved rates over the last ten months alone.
Low rates for long-standing customers
Financial regulator the Financial Conduct Authority has also said that savings customers are loathed to switch accounts, which leads to some providers capitalising on this by offering the lowest rates to the longest standing customers.
Crowdstacker, founded in 2014, said its own research found that less than only one in five, or 19 per cent, of savers were confident they were getting the best interest rate on their savings, but despite that 66 per cent say they were unlikely to bother switching.
Crowdstacker co-founder and chief executive Karteek Patel said: “There are several issues with the savings market at the moment, not least the loyalty penalty which is unfavourable to people who don’t actively manage their cash savings. A lot of money is obviously just sat there not working as hard as it could.”
Customers can pre-register to sign up for the account on Crowdstacker’s website now, the firm said it plans to launch the service “in late 2019”.