Online banks will have to take a larger share of the U.S. deposit market by Evercore

A FILE PHOTO of The logo as well as the distribution to Capital is to be shown on a display on the first floor of the New York Stock Exchange (NYSE) in New York, New York, USA, May 21, 2018. REUTERS/Brendan McDermid

(Reuters) – Online banks such as Ally Financial Inc. (ALLY.(N) and Capital One Financial Corp (COF.(N), can be expected to have a larger share of the overall US deposit market, after racking up $95 billion in customer deposits this year, with the enticing rate of interest on most savings accounts.

Online savings banks are beginning to take market share away from traditional consumer banks that are increasingly offering higher interest rates on deposits are part of a new generation of smart, strong purchasing power of consumers, which, like the higher payments on their deposits.

According to analysts of the real estate business, Evercore ISI, these online banks are now cornered about 10% of the total deposit market in the U.S. – or about $1.26 billion.

“There are a dozen or so, plus the online banks (and some of the E-brokers), which have a much higher rate of return as a way to entice deposit growth … and it’s working,” Evercore said in a research note.

Of the 10 largest banks, led by Bank of America Corp (BAC.Who at the moment dominate the industry, in deposits, holding a 48% share, or approximately $6.13 dollars, according to the report.

Reduced overhead-and the rules-light models is the creation of a major online banks have to pay five to 10 times more in deposits than that of the traditional consumer, the banks, the report said.

The market share of these banks has more than tripled in the past decade, supported by higher prices during a low interest-rate environment, among other things.

The broker also expects the growth in the deposit base and to improve it in the near future, as new entrants are expected to grab market share from the smaller players that have not upgraded their computer systems. New entrants have so far pushed out of the way of the smaller co’s are more tech-savvy, and also by offering better rates to consumers.

Reporting by Abhishek Manikandan in Bengaluru; Editing by Bernard Orr

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