The Forbes Content & Design Studio conducted an interview with Pierre Habis, General Manager & Head of Synchrony Bank. The following excerpts from that interview have been edited for length and clarity.
Many people are enduring subpar returns on their savings, according to a recent study by Forbes Research in partnership with Synchrony Bank (member FDIC).
More than half (57%) say they’re leaving $500–$14,999 on the table by not optimizing their accounts; a further 8% say it’s even higher.
And while 69% say their existing relationship with a financial institution influences where they keep their savings, there’s an openness to change: 64% say they would choose an online-only bank or fintech to earn a higher interest rate.
Below, Habis shares four key insights on optimizing your savings strategy.
1. Inertia Means Many Aren’t Making Their Money Work Hard Enough
When I talk to consumers … I ask: ‘Are they earning more than inflation?’ … that’s where people’s minds start clicking. … If you’re not earning 3% or 4%, then you’re losing money.
Many people use low-yield savings accounts, I don’t necessarily believe it’s due to a lack of awareness completely; it’s the action part that’s missing. It’s no different than many other non-financial activities people go through, whether it be exercise, reading a book or whatever the case may be. It’s that first step, right? It’s taking the time to do it.
Switching to a digital-first high-yield savings account is actually quite simple, and within five minutes, you could open up an account digitally on your mobile phone, or on the web, or place a phone call to these banks that actually have a greater earnings power than where you’re currently at.
Once they do it, people never go back to not optimizing their savings in that regard.
2. Digital-First Banking Has Built-In Advantages Over Traditional Models
Digital banks don’t have the burden and the cost of a traditional brick-and-mortar. … If you live in Los Angeles, why should you carry the burden of the cost of physical locations and rent and leases and electricity in Texas? Customers must look at where is the highest return. … The reality is our cost structure … allows us to pass better rates along to the consumer. … The very simple model that we have is: You save with us, you earn with us. Is there a minimum? No. Is there a fee? No. And are there tiers to your balances and so forth? I’d say no.
When you have a traditional model, you’re trying to adjust user interfaces to consumers’ behavior today, but when you’re a digital bank, it becomes automatically the way it’s built, the way consumers want it. … Synchrony Bank is really built around the consumer’s preference of how they want to bank and how they want to use their dollars, because it’s their dollars.
3. Higher Returns Don’t Mean Sacrificing Convenience, Liquidity Or Security
Where I’ve seen consumers want a special holiday savings fund or an educational savings fund … the barrier really comes into play is there’s a minimum balance needed at many banks. And so, they can’t start, or else there’s fees and so forth. At Synchrony Bank, there’s no minimum. So, you can open up multiple accounts with as little as a dollar each and then begin to build that way. And the accessibility of the money … is just a few clicks away in a very safe and secure way.
You’re earning money on your power, and it’s completely liquid, and it’s FDIC-insured (Federal Deposit Insurance Corporation). … FDIC-insured savings are the safest savings you could have in this country. … Sometimes, when savers see a physical brick and mortar, they think that’s the security, when in reality it’s their FDIC insurance.
4. Loyalty To Legacy Institutions Isn’t Delivering Enough Value
Choosing a bank is less about the brand and the commercials you see or the big building that you see. It’s about: Is the government backing this firm up because they’ve looked at it and it’s good? And reputationally, are they good? And then, what’s their return? And when you put all that together, you’ll find the best places to go are the ones, probably not where you’re at right now.
I encourage everyone, whether you’re a customer of Synchrony Bank or not, to go onto our website, play with a calculator, understand the power of money and time and rate, and make a decision. And I hope they make the decision to move forward and start earning more for their hard work and money.