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Savings platforms open to further regulation after City and banking watchdogs ask banks to review oversight

The i 21/04/2021 Alys Key
a person walking down a street holding an umbrella: Customers can use the platforms to easily shift money to wherever it will get the best rate (Photo: Getty/AFP/Tolga Akmen) © Provided by The i Customers can use the platforms to easily shift money to wherever it will get the best rate (Photo: Getty/AFP/Tolga Akmen)

Savings aggregators have largely welcomed the prospect of further regulation, after the City and banking watchdogs last week wrote to banks warning of potential risks involved in the financial products.

Deposit aggregators, sometimes called savings platforms, work with a range of banks and building societies to put customers’ money into the place where it can get the best rate.

In a joint letter to bank bosses last week, the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) said they wanted to make lenders aware of the risks of working with aggregators. The letter set out of a series of next steps for lenders including considering the levels of transparency attached to these platforms and how much their business relies on deposits made through aggregators.

“Deposit Aggregation is a relatively new and growing part of the industry and we recognise the benefits the services bring to consumers,” they wrote. “We do not want to stifle competition or innovation, but we do want regulated firms to be aware of any potential risks as the industry develops.”

Possible issues flagged in the letter include the potential harm to consumers if they do not understand how their money is protected under the Financial Services Compensation Scheme (FSCS), the statutory deposit insurance which protects up to £85,000 in the event a firm goes bust.

Deposit aggregators tend to use either a ‘direct’ or ‘trust’ model, and the latter can mean it takes longer to receive FSCS payments, the regulators warned. Customers might also be unaware that their money is not fully protected if they hold more than the FSCS limit at the same bank, even if it is split between their own account and a deposit made through one of the aggregators.

Most deposits made with savings aggregators are eligible for FSCS coverage, but the regulators said the terms needed to be made clear and banks should plan ahead to ensure money is paid out promptly in the event of a failure.

In response to the letter, aggregator operators welcomed the attention of the regulators and emphasised the potential benefits of their platforms.

“Deposit aggregators allow savers to access a range of banks and savings accounts via one system, thereby easing their ability manage their savings and enhancing the ability to shop around,” Alistair McQueen, head of savings and retirement at Aviva said. Aviva runs the Aviva Save offering in partnership with Raisin UK.

“Aviva supports and follows the best practice outlined by the FCA,” he added.

More than one aggregator also told i that banks already conduct significant due diligence before joining their platforms.

Kevin Mountford, co-founder of Raisin UK, said: “Raisin UK very much welcomes the recognition that both the PRA and the FCA have given in this letter to the rise of deposit aggregators. We believe deposit aggregators play an important role in not only providing more options for consumers to access savings products safely and easily but also enabling banks and building societies to diversify their liquidity risk by offering another safe and reliable channel of deposit funding.

“As a business, we already work to any banking partners due diligence processes and hold a large store of information on hand with regards to our set up and structure, along with our internal policies and procedures. A large amount of this is passed to our partners as part of the onboarding process to ensure that the partner is comfortable with our setup and governance.

“We welcome any regulatory transparency and oversight for deposit aggregation as we believe this would help standardise the industry and provide further protection to consumers along with clear guidelines for firms which operate in this space.”

Alex Lambert, external relations manager at Hargreaves Lansdown, said: “Savings platforms help make the cash market more accessible, and offer more choice and improved returns by creating competition between banks and building societies. As this part of the industry continues to grow, we welcome the regulators’ approach to developing the market for the benefit of savers without wanting to stifle competition or innovation.”

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