I’ve noticed that other fintech providers such as Chip are begining to offer a variety of savings options. Offering a new easy access account paying 0.70%, also a savings account offering 1.25%… is this sort of thing somthing Dozens should get into?
hi @sczs - been a while since we chatted, so thanks for the question.
Yes! It is something that Dozens has always intended to offer. The first problem is that we are not a bank (as we like to point out for clarity’s sake) so we cannot simply offer accounts that pay interest directly ourselves. Sadly, there are plenty of ‘banks’ out there that could, but don’t!
That’s why we created the bonds that pay 5% as a way of rewarding our customers.
We have other plans for the future, some of which might come quite soon, some that are longer term objectives.
Our first priority has been to create the investment flow to help customers get started as soon as possible for their longer term plans. We are now working on the full launch of Dozens Black, which will be our subscription service that will mean that those investments can be made free of any platform fee - and the fixed monthly subscription will cover all fees for this plus a range of other exciting benefits.
Once this is all in place, we will explore other savings options such as term deposits, … and some other innovative capital-protected offers.
The roadmap is full and very exciting, and we’re still a small but highly motivated team working to make it all happen!
A question back to you … what would your ideal account include (in terms of savings and investment options)?
Being a person who chase the highest savings interest rate, I actually don’t like Chip and don’t use them.
A few things put me off:
- They are not FSCS protected
- They pay “bonus” instead of “interest”, and I expect there’s a reason for that. (I’ll stick with the word “interest” for now)
- Fairly low limit on the deposit amount earning interest. I remember it was £2000 for the free account. The paid account doesn’t give you 1.25% equivalent rate because the fees.
- They pay simple (vs compound) interest rate, and you have to earn interest on the bonus already paid to you, you will have to withdraw all your money and then put them all back in the same account, but that leads to the next point…
- Their interest is not calculated daily. If you take all cash out and then put them back on the same day, you will lose more than 1 day worth of interest. This also means if you frequently take money out or pay in the account, you will earn far less than the headline interest rate of 1.25%.
- Their customer service is also very slow. If you send a chat message to them on the app, you will getting an email back in a couple of days, feels like the 90s technology. Please don’t take me wrong, I have no problem with emails, in fact I’m pretty happy to chat over email with many companies, because they respond rather quickly, and I can start the conversation and then reply in the email too. As far as I remember I couldn’t reply in email with Chip.
I am a reluctant chip user - no interest in letting them spy on all my banking so they can tell me how much I should save. But I do use the free product to hold money - but only before I put it into bonds here :). Dozens are basically doing the same thing - paying interest-like bonuses as a form of marketing, but they do it better - the bond structure is a better fit and by fixing the terms/limiting the amount available they excuse a lot of the waiting to put money in/out… Oh and its 4x the rate of Chip :).
For the record I believe the new 0.7% account pays regular, compounding interest. It is definitely FSCS protected, unlike the 1.25% account.
But with rates creeping up, I’ve not opened a 0.7% account - hanging on to see who else goes 0.7% or even higher…
But back to the @sczs’s original point - as the bonds here are becoming more popular, I hope Dozens can work out a way of offering some product with an intermediate level of interest… please?
There’s a huge difference between a stock exchange listed bond (Dozens) and a self-managed savings retention bonus (Chip).
The Chip’s “savings” product pays a bonus for user to retain their savings in the Chip account for each defined period of time, but unless they have something against it written in their T&Cs, they can reduce or stop paying the bonus at any time, even after the bonus had become payable, without much consequences other than some unhappy customers.
However, the Dozens bonds are listed on a stock exchange, once they are issued, the issuer (Dozens) cannot amend them in any way, and they have to honer the coupons and the schedule, unless they default, which is a much bigger issue for Dozens as debt collectors, auditors and administrators will all likely to get involved in it.
It’s actually more than 4x the rate of Chip. “Interest” in the Chip account is a simple (vs compound) interest, not calculated daily, and the “interest” is paid into the same account. To earn any interest at all on the “interest”, you will have to forgo a whole period of “interest” on the principal by withdrawing everything from the account then put them back. So you get either a 1.25% flat simple rate or a less than 1.25% compound rate which is likely to be worse than the 1.25% annual rate.
The interest (no quotation marks here, it’s a real interest) paid by Dozens, on the other hand, is paid directly into your cash account with no strings attached. You can “reinvest” the interest as soon as it’s paid to you. You may not be able to get 5% on the interest by saving it elsewhere, but you will get an annual rate of more than 5% as long as you move the interest into a savings account after they are paid to you. So you will get at least a 5% flat simple rate, with the potential to go higher.
That’s true, but again, I’m getting the exact same 0.7% elsewhere with no strings (app, open banking, etc.) attached, and it’s with a bigger and more reputable bank too. Not to mention the limit is also much higher than the £30k offered by Chip. Note: the 0.7% account I use is available to existing customers only.
That’s actually easier said than done. Because Dozens doesn’t offer credit products (such as loans, credit cards and mortgages), the interest they pay will be 100% coming out of their marketing cost. You probably have noticed that other banks who offers credit products (or investment firms who use leverages, but let’s keep it simple here) will tend to offer the best rate on the table for a very short period of time (as short as a day) before they pull the savings product off the market. That’s because when they have an increased demand on the credit product side of business, they’ll needed the money to lend to their customers. As soon as the demand is met, they will pull the plug on the savings product. They can offer the higher interest rate savings product because they know for certain that someone else will pay a much higher interest to borrow the money from them right now. If Dozens ever offers a savings product “with an intermediate level of interest”, it will be something no higher than the market average.
On the profitability point, if Dozens really wants to do good, and not offer exploitative credit products to their customers, I think there’s a few ways to make money from the savings, subject to regulatory approval, of course.
- Offer the savings product from other banks, act as a broker
- Lend to financial institutions who does no (direct) harm to retail customers, such as investment firms (I guess this is hard to get an approval) or good building societies (this could be easier)
- Offer mortgage products to their own customers, like many building societies do (a banking license is required)
- Invest a portion of the money (again, a banking license is required)
- Find a way to really convince their customer to move their money from savings to investments, and earn the platform fees instead. If the cash savings is low enough, the platform fee might be enough to pay an average market interest rate. Of course, this won’t work at all if you offer a market leading interest rate, because a huge amount of new customers and new money will flow into it in a very short period of time, and you definitely won’t have time to get your customers to convert the savings to investments.
For FSCS protection, not sure if you’re referring to the whole account or just the bonus/interest…
In case the former, with the 1.25% account (Chip+1), your deposits are actually FSCS-protected, but the bonus payouts are not.
I believe it’s also only available if you are on one of Chips paid tiers.
Not worth the hassle imo given other banks are offering 0.65% on instant access accounts.