Online Future
I am your typical Generation Y consumer, reasonably computer literate (don’t ask me to fix your server or anything), time poor and cost conscious.
Like many of my peers, I am stuck in the rental market while I struggle to put as much money aside each payday so that one day I may be able to achieve the Australian dream and own my own home (a seemingly impossible task these days!)
I have been following this routine for a number of years now and while my deposit still has a way to go before it reaches the necessary size, I have recently been looking into where to store my life savings.
My first thought was term deposits. Surely if I lock my savings away for three, six, nine or 12 months I will get the best rate possible? The best rate I could find was a two year term deposit that received 6.60% with a minimum balance of $25,000.
I then checked the increasingly popular online saver accounts and was surprised, nay shocked to see that while no providers could better this particular rate, many came close.
Ubank offer 6.01%… at call… with no paperwork required, no minimum balance and they will bump up the rate to 6.51% if you set up an automatic savings plan of $200 a month.
This got me thinking.
Firstly, is the term deposit dead?
Why would you lock your savings away for two years (or any length of time for that matter), in a rising interest rate environment, when you can simply open an online savings account, receive 6.51% variable interest, at call, no minimum balance with no paperwork required?
How can term deposits possibly compete with online saver accounts, when rates have become so competitive?
One of the main attractions for Gen Y, with convenience a key driver, is the lack of paperwork; the account can be opened online in under 10 minutes.
Secondly, we all know that online banking has revolutionised the industry, but how far will or can it go?
Recent research conducted by CoreData shows that around 90% of banking customers use internet banking – considerably ahead of the branch network (65.7%) and telephone banking (56.2%).
Further, when asked to select their preferred communication channel, the gap between internet banking and other channels grew considerably.
Internet banking is clearly the preference, yet a substantial number of customers still visit their branch.
Branches cost money; the lack of branch networks is key to online savings accounts’ competitive advantage and higher interest rates.
So if it is possible to open an account purely online as Ubank has achieved, how long will it be until the branch networks go the way of the dodo (or should I say term deposit).
I suspect that just as my parents would tell me with wide eyed disbelief ‘A Coca-Cola used to cost $0.10′; I will one day be telling my kids ‘We used to have to go into a branch to do our banking’.
2 Comments on “Online Future”
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Peter Vickers says:
Quite right but you now need to take it to the next step.
If you want advice from a human where do you go?
To a branch where you are treated like a valuable customer and meet and discuss your personal situation and get AVICE.
The banks have now come to this conclusion also and thus the TV ads being run by ANZ and Westpac
GenZ says:
You’ve hit the nail on the head with your opening line. You are tech savvy and know how to use a pc and internet banking. Believe it or not, there are still old folk in the community that are too scared or do not have the confidence to use online banking.