In recent years, neobanks have emerged as formidable competitors to traditional banks, offering innovative solutions, user-friendly interfaces, and often lower fees. However, one of the most noticeable features of neobanks has been their reluctance to pay interest on checking accounts. But now, it seems the tide is turning.
Interest Rates at Neobanks: A New Trend?
Direct Banks Take the Offensive: Traditional online banks like ING Diba, DKB, and Comdirect have confronted customers with account fees and occasional negative interest rates in recent years. Surprisingly, this hasn’t diminished their popularity. According to the renowned Allensbacher Markt- und Werbeträgeranalyse (AWA), many German consumers are still convinced by direct banks. ING Diba has even reinstated its goal of reaching 10 million customers, while Berlin-based rival N26 has gained between 250,000 and 300,000 new customers this year. It appears that classic direct banks are not being crushed between branch banks and neobanks. Instead, ING Diba, DKB, and Comdirect are engaging in an interest rate battle.
Profitable Customers Despite Low Interest Rates:
During times of negative interest rates, banks found it challenging to make customers more profitable. The recent decision by the European Central Bank (ECB) to raise overnight deposit rates to 2.0% has changed the situation. A balance of 5,000 euros now generates 100 euros of risk-free interest income per year. While N26 continues to suffer under BaFin’s cap on new customers, ING Diba, DKB, and Comdirect are once again offering interest.
Smaller Neobanks Lack Resources:
N26 has millions of customers and sufficient financial resources. However, smaller neobanks in Germany have limited resources. Hamburg-based fintech bank Tomorrow recently laid off a quarter of its staff.
Conclusion: A Glimmer of Hope for the Fintech Scene?
The fact that neobanks are now offering interest could be an indication that the fintech scene has regained momentum and is recovering. It remains to be seen how this trend will evolve and whether neobanks can further solidify their position as serious competitors to established banks.
Some well-known neobanks offering interest on checking accounts:
- C24 Bank: As the first bank ever, C24 Bank introduced savings account interest rates for deposits in checking accounts in 2023. All checking account customers receive 2.5% interest on their deposits up to 50,000 euros.
- Neon Bank: The Neon Bank in Switzerland offers interest on balances. From April 1 to June 30, 2023, interest rates are 0.9% on balances up to CHF 25,000 and 0.65% on balances over CHF 25,000.