By Oliver Smith on Tuesday 17 March 2020
A knock-on impact of the coronavirus interest base rate cuts.
As central banks around the world slash their interest rates, the actions are having a knock-on effect with digital banks, particularly in Australia.
Earlier this month we saw Xinja turning away new customers for its 2.25 per cent savings account, a measure that continues to be in effect.
Now local rivals 86 400, Up and Volt Bank are slashing their own savings rates in response to the Reserve Bank of Australia cutting interest rates to a record low of 0.5 per cent on 3 March.
86 400 echoed the Reserve Bank’s 0.25 per cent reduction on Friday by cutting its own rates from 2.25 per cent to 2 per cent.
Over the weekend Volt Bank likewise reduced its savings account from 2.15 per cent to 1.90 per cent, and Up similarly cut its savings account rate from 2.25 per cent to 2 per cent.
In a statement Volt’s CEO and co-founder Steve Weston explained: “We are acutely aware of the need for the Australian public to trust neobanks to do the right thing for our customers.”
“This includes building a viable and financially sustainable business over the longer-term. In this endeavour, the responsible move right now is to cut our rate.”
Xinja resisted cutting its own rate, arguing that it would be like “hurting existing customers while chasing new ones”, but given the sustained economic crisis is set to continue for the foreseeable future it’ll be interesting to see how long that decision lasts.