US banking giant JPMorgan Chase & Co has launched its new digital retail bank, Chase, in the UK today, which is expected to stoke up the competitive fires among domestic high street lenders.
While the launch was expected, the launch confirmed details about Chase current account, including that it will come with a rewards programme offering 1% cashback on all eligible debit card spending for 12 months.
New customers will also be offered a market-beating interest rate of 5% on its cash round-up savings feature, where each transaction is rounded up to the nearest pound and the difference is siphoned off into a savings account.
In June, JPMorgan Chase looked to strengthen its offering in the UK with a deal to buy startup Nutmeg Saving and Investment, though the acquisition is still subject to regulatory approval.
“Having spoken extensively to consumers across the UK, we know that people want good value combined with an excellent experience, from a trusted bank," said Sanoke Viswanathan, chief executive of JPM's international consumer growth initiatives.
“With cashback on everyday debit card spend and an interest boost on round-ups, we can help customers save while they spend on items they already buy every day.”
The launch comes three years after US rival Goldman Sachs ventured into the UK consumer banking market with its Marcus account, which signed up 50,000 UK customers in its first two weeks.
Laura Suter, head of personal finance at broker AJ Bell, said Goldman's Marcus sparked a shake-up of the savings market and a rates war that benefitted savers, leading to high hopes that this new offering could do the same.
“First impressions are that this new account will blow the competition out of the water, with an attractive cashback deal and a market-beating interest rate on its savings feature. The 1% cashback is better than rivals as it’s on spending, rather than just certain bills or direct debits, and it also doesn’t require a minimum monthly deposit or come with a fee. Assuming the cashback is uncapped, the rate means that if someone spends £500 a month on their debit card they’ll get £5 back. What makes it more attractive to some is that they don’t need to switch accounts to get the offer."
With cash round-up features becoming fairly commonplace with banks, she said the fact that Chase is paying 5% interest “makes it very attractive. The top rate you can get from other banks paying interest on their round-up feature is 0.25%, meaning the new Chase rate leapfrogs those offerings. However, if the savings rate is only offered on the amounts saved by round-ups and you can’t add funds to it, it will be paid on a relatively small sum. It’s still attractive for those who want to get into the savings habit and earn some interest at the same time."
She said drawbacks for some customers will be the lack of bank branches, with all customer support online or over the phone, with administration of the account via an app.