Uncertainty and confusion regarding interest rates have been rife throughout the last few years. The UK base rate, set by the Bank of England, has remained high – resulting in significantly higher mortgage and loan repayments. Meanwhile, many of the most reputable UK banks have failed to apply these rates to customer savings.
One UK-based cash deposit platform, Flagstone, has thrived in this environment, more than doubling the size of its Assets under Administration (AUA) since January 2023. The fintech business’s AUA now stands at £13.5billion having consistently increased by over £1billion per quarter in the last 18 months.
Flagstone’s customer base of individuals, small and medium-sized businesses, and charities have also increased significantly, signalling accelerated adoption of the company’s fintech platform and heightened demand among consumers and companies for competitive cash savings options.
Between March and July 2024, the number of active customers accessing Flagstone’s savings services increased by 21 per cent from 600,000 to 725,000.
Simon Merchant, co-founder and CEO of Flagstone
Simon Merchant, co-founder and CEO of Flagstone, comments: “Uncertainty around the Bank of England base rate and turbulence in the wider financial markets are prompting more savers to think about what they want to do with their savings and take action to make their money work harder for them while mitigating risk.
“Across the market, it’s not been hard to find inflation-beating returns for all sizes of deposits and types of accounts – from instant access to multi-year fixed terms. As the Bank of England base rate starts to edge downwards for the first time in over four years, it’s reasonable to expect some softening in the sorts of rates on offer. Nevertheless, with mortgage affordability now set to rise and appetite for other forms of credit expected to increase, we’re going to see continued competition among banks to offer competitive, inflation-beating returns on savings for months to come.”
Forty-five per cent of Flagstone’s currently available accounts offer returns of 4.5 per cent AER or greater – more than two times current inflation figures. Flagstone’s savings accounts consistently feature on comparison sites’ best-buy tables.
Serving an underserved market
Recent research by Flagstone shows that one in six (15 per cent) UK adults have no savings accounts, while 32 per cent only have one. Fifty-eight per cent keep most of their savings in the same bank that maintains their current account, and 49 per cent of savers haven’t moved savings between existing savings accounts within the same bank in the last 12 months.
Meanwhile, the average Flagstone saver has four savings accounts with three banks and moves savings at least six per year.
The UK savings market is worth £1.7trillion, but two-thirds of this cash (over £1trillion) is held in accounts earning two per cent or less in interest per annum. A quarter (£250billion) of these savings are in 0 per cent accounts earning consumers nothing.
Flagstone continues to reinvest profits in high-performance operations and expansion through more bank and brand partnerships. Since Spring 2024, the number of banks offering savings accounts on Flagstone has increased by 10 per cent to 66.
“We’re encouraged by these 18 months of widespread demand and adoption not just from customers but from our partners too,” explained Merchant. “Expanding our panel of banks by 10 per cent in less than six months is a good indicator of the seriousness with which banks and advisers are treating cash savings as an important and rewarding asset class.
“The speed and breadth of our growth in the last 18 months demonstrates the ideal opportunity for fintech businesses to tread where traditional financial services can not. Flagstone’s relentless fintech innovation is helping more savers to see that cash isn’t simply a safe haven for the risk-averse to keep their rainy day savings, but a highly competitive, high-return, low-risk alternative asset class in its own right and an essential component of every personal finance plan.”
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