‘Reverse auction’
The process, known as a ‘reverse auction’, enables people with over £5m ($7m, €6.2m) in cash to get banks to bid for their deposits by offering their best possible interest rates via a new platform created by Flagstone and launched on Friday.
‘Silent’ bidding
The software system, named Flagstone Reserve, involves a ‘silent’ bidding process whereby banks are presented with an anonymous depositor and have 24 hours to make a bid for their money if they wish. Those bidding will not be informed of which other banks have also put in an offer but will be made aware of the winning bid.
While banks can use the platform for free, Flagstone revealed that individuals will be charged a fee of 0.175% anually for deposits between £5-10m and 0.15% for deposits over £10m.
The company said testing of the platform produced average interest rates that are between 20-30% more competitive than the best published rates on the market. In some cases, the platform secured rates that are up to 50% more competitive.
More than over 20 banks have already signed up to the platform including Santander, Investec, SG Hambros, Arbuthnot Lathan, Metro Bank, Shawbrook, and Aldermore.
Low returns for savers
The launch comes at a time when people are holding more cash than ever before, with latest figures from the BBA showing that personal deposits have grown 3.8% in the last year, despite interest rates remaining at historic lows.
Andrew Thatcher, founder and managing partner of Flagstone, said: “Flagstone Reserve has been designed to enable wealthy depositors, who are understandably underwhelmed by the poor rates on the market, to make a higher return on cash that would otherwise be languishing in accounts earning almost no interest.
“The individual secures a much better interest rate than they’d otherwise get, while banks benefit from new cash coming on to their balance sheet.”
