People rarely save for one thing only. Never mind retirement – even considering just short-term savings, we usually squirrel away money for multiple priorities, be it a vacation or replacing an aging furnace.
Until recently, Canadians had to link their bank accounts to spreadsheets or money apps in order to keep track of their progress toward their savings goals. For the less tech savvy, the option was spreadsheets or just good old envelopes and money jars.
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At least one of the big banks, though, seems to have caught on.
On Thursday, the Bank of Nova Scotia launched a new savings account that allows users to channel their savings into up to five different buckets, which users can label based on their goals.
The account, called Scotiabank Momentum Plus, also features a tiered interest rate that’s tied to the length of time money is left in a particular bucket. The longer the savings period, the higher the interest, up to 1.6 per cent.
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The account offers an annual interest rate of 0.7 per cent regular interest, plus between 0.75 per cent and 0.9 per cent in premium interest, depending on the savings period. Customers can choose to save as they would with a regular savings account, or pick a “premium” savings period of 90, 180, 270 or 360 days, according to details provided by Scotiabank.
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Customers can open a new account and set up different savings channels using the Scotiabank app. There is no monthly fee or minimum balance required.
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The account “makes terms deposit more accessible,” said Jeff Hindle of MaRS Discovery District, a Toronto-based non-profit that fosters tech innovation.
Though buckets for savings goals are nothing new in the world of money apps, the idea of a tiered interest rate tied to the length of the savings period seems quite new in the Canadian market, he added.
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EQ Bank, the digital banking arm of Toronto-based Equitable Bank, does have a savings account where customers can set up different savings goals, according to Ratehub.ca, a website that rates mortgages, bank accounts and other financial products. And EQ Bank customers earn an everyday rate of 2.3 per cent with no strings attached, Kerri-Lynn McAllister, chief marketing officer at Ratehub.ca, told Global News.
“Smaller providers and digital banks often have competitive rates because they can pass along the savings of not having a large branch network directly to their customers in the form of higher interest rates,” McAllister said via email. Still, “this Scotia rate is a competitive rate among the big five banks, and is a good direction,” she added.
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In general, the Momentum Plus savings accounts seems “an early example of the new products and services inspired by FinTech innovation,” said Hindle.
The flurry of money apps that have hit the Canadian market in recent years – think Mint, Borrowell and Wealthsimple – is putting pressure on traditional financial institutions to innovate.
Big banks including RBC and CIBC, as well as insurance behemoths like Manulife, are all rushing to attract top tech talent to work on anything from new digital financial products to big data and artificial intelligence.
Scotiabank recently set up a whole new office, dubbed Digital Factory, in downtown Toronto, where techies labour on new digital customer offerings.
“There’s a realization among incumbent financial firms that they have to change the way they think and operate,” said Hindle.
For consumers, it seems, it’s a win.
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