In Belgium, the the traditional savings account remains very popular, benefiting from a total deposit of more than 300 billion euros. With around 11.5 million inhabitants, this represents on average around 25,000 EUR per Belgian in their savings account. However, this is an average value; Most Belgians do not have this amount in their savings account, which means that some hold significantly larger sums.
Nevertheless, the savings account arrived under surveillance in recent years for several reasons:
-
For years, interest accrued on savings accounts fails to keep up with inflation rates. As a result, money deposited in a savings account gradually loses its value.
-
Following the banking crisis, many people couldn’t access their funds for a very long time, due to placement in banks in financial difficulty (e.g. people who deposited their savings at Kaupthing Bank or Optima Bank). Although deposits are protected by a guarantee of EUR 100,000, this may prove insufficient for those with substantial savings.
-
THE emergence of crypto-investment platforms (e.g. CoinBase or Binance) and online Fintech brokers (e.g. Robinhood, eToro or EasyBroker) has significantly reduced the barriers and costs associated with investing, presenting viable alternatives to traditional savings accounts.
-
The Belgian government recently introduced a short-term government bond to compete with bank savings accounts, with the aim of pressuring banks to increase their interest rates, as they felt the lack of competition was leading to unacceptably low interest rates.
Despite these disadvantages, the the savings account remains a familiar, simple and user-friendly banking product to put money aside for future acquisitions or as a reserve for rainy days. Other alternatives, while potentially more beneficial, often prove too complex for the average person, especially those who do not work in the financial sector.
However, to encourage a shift towards better financial products and services, banks should consider new innovations, facilitating easier, lower-risk investments, as well as simplifying day-to-day personal cash management.
The following products might help you:
These ideas build on existing banking products and services, but we could think outside the box, for example by eliminating the concept of a savings account altogether. See my blog “A bank account – A concept from the past” (https://www.finextra.com/blogposting/18567/a-bank-account—a-concept-of-the-past).
However, there are many innovative ideas that can improve the existing savings account experience and help people manage their finances more effectively. Examples are:
-
Gamification: When it comes to modernizing savings accounts and making them more attractive, gamification is a powerful tool. By incorporating elements like badges and cool animations, savings accounts can transform into a more enjoyable and interactive experience for users. To better understand how gamification can revolutionize financial services, I delved into this topic in my blog “Gamification – A good idea for a serious subject like financial services?” (https://www.finextra.com/blogposting/19896/gamification—a-good-idea-for-a-serious-topic-like-financial-services)
-
Backup objectives: One of the key aspects of a satisfying savings experience is setting clear goals. Linking specific goals to a savings account can transform the act of saving into a fulfilling customer journey. Understanding the motivations that lead people to open savings accounts and aligning them with their goals is crucial. To find out how to do this effectively, take a look at my blog “PFM, BFM, Financial Butler, Financial Cockpit, Account Aggregator… – Will the heavy administrative tasks related to your finances finally be taken care of by your financial institution?” (https://bankloch.blogspot.com/2020/02/pfm-bfm-financial-butler-financial.html).
-
Automation of backup actions: Automation is key to simplifying the savings process. Automated savings actions, such as setting aside a fixed amount per month, automatically transferring excess funds from your checking account to your savings, automatically rounding expenses (and saving the rounding difference ) or algorithm-based savings forecasts (e.g. Plum and Chip), save hassle-free. These actions ensure that saving becomes an integral part of a person’s financial routine.
-
Saving simulators: Understanding the potential future outcomes of your savings can be empowering. Savings simulators are valuable tools that help individuals visualize their financial future based on the amount they save each month. These simulators, designed to be fun and graphic, can also incorporate various scenarios, including inflation and an increasing amount of savings over time. They provide a tangible representation of financial goals and motivate continued savings efforts.
-
Save Now, Buy Later (SNBL): SNBL programs offer an interesting twist to traditional savings. By allowing individuals to save for a specific item they intend to purchase, in collaboration with the SNBL supplier and merchant, this approach can provide some incentives to reach savings milestones. To learn more about SNBL, explore my blog “Is SNBL more sustainable than BNPL? » (https://www.finextra.com/blogposting/22453/is-snbl-more-sustainable-than-bnpl)
-
Markets: To provide users with a wider range of savings options, the concept of marketplaces can be introduced. These platforms allow customers to access savings accounts from a variety of third-party providers, improving choice and encouraging competition in the savings account landscape. For example, Raisin offers a platform that facilitates access to a variety of savings options.
-
Price Linked Savings Accounts (PLSA): Prize Linked Savings Accounts (PLSAs) introduce an element of luck and excitement into saving. In these accounts, interest payments are distributed as luck-based prizes, encouraging individuals to save regularly for the chance to earn rewards. Several providers, such as Save to Win, Walmart’s Prize Savings, Yotta Savings or Big Prize Savings, offer PLSA options. Taking this concept further, Layup integrates sports results, allowing customers to win cash prizes and branded merchandise based on sports game results.
These innovative features and approaches aim to improve the traditional savings account, making it more attractive, goal-oriented and rewarding for individuals. By infusing creativity and technology into the savings experience, we can motivate people to manage their finances more effectively and better achieve their financial goals.
Discover all my blogs on https://bankloch.blogspot.com/
