The new savings account, which requires an Apple credit card account, pays 4.15 percent in annual interest compared to the average savings account rate of 0.39 percent, according to the Federal Deposit Insurance Corp. Opening an account via the iPhone’s Wallet app requires just a few clicks.
The accounts are held at Goldman Sachs, Apple’s credit card partner, and insured by the FDIC up to $250,000. There is no minimum balance or minimum deposit amount, and no fees, but accounts are capped at the insurance maximum of $250,000.
“It’s great for savers, and it’s great that there’s more competition,” said Larry Glazer, managing partner at Mayflower Advisors in Boston. “But it’s bad for local banks.”
Smaller local banks may not have been paying much to their depositors, but they provide significant lending to community businesses and construction projects, Glazer noted.
Even before Silicon Valley Bank failed last month, consumers were already fleeing from low-yielding bank savings accounts to higher yielding alternatives, including money market funds, Treasury bills, and certificates of deposit. The trend accelerated after the FDIC seized Silicon Valley Bank on March 10. Large banks have lost $234 billion in deposits so far this year through April 5, and small banks have lost $237 billion, with the majority of funds departing after SVB’s demise.
Much of the money that moved due to the Silicon Valley Bank collapse was in large accounts above the FDIC insurance maximum, noted Cornelius Hurley, a former director of the Federal Home Loan Bank of Boston, who teaches financial services at Boston University. Apple’s offer could draw even more money away from small banks by appealing to younger, tech-savvy customers with smaller account balances.
“The banks have definitely been taking advantage of the inertia of most customers,” Hurley said. “Apple doesn’t have the brick and mortar branches to support. It’s a branch in everyone’s pocket.”
A shrinking banking industry could ultimately pay off for Massachusetts because of the region’s growing strength in financial technology startups, Mayflower’s Glazer said.
“We’re going to be seeing more and more fintech firms, but fewer banks,” he said. “We probably benefit more as a community from this trend and this embracing of technology because we’re a technology hub.”
Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him on Twitter @ampressman.
