A research by YouGov has revealed that 76 per cent of Britons do not know how their money is used by banks
Three-fourth of consumers in the UK do not know what banks are doing with their money and have demanded transparency from banks. They want to know how their money is invested by banks as three quarters of consumers (76 per cent) don’t know that their savings are lent to other customers. These have been revealed after research from Learn to Trade.
In a process known as ‘fractional reserve system’, banks take savings from consumers current or savings account to lend to other customers for profit – a process not known to three-quarters of consumers, a research by YouGov has revealed. On knowing the process adopted by banks to invest consumer money to lend to other customers, nearly a third (29 per cent) said that they are now more likely to change the way they put their money in banks in future. They said that they will either put less money in banks, find alternative investment methods, or read terms and condition more carefully when opening an account with a bank.
CEO of Learn to Trade, Greg Secker says, that while currently there is scepticism in the UK around alternative saving methods – such as Forex trading – what consumers fail to realise is that their money is being traded the moment they open a bank account. For banks, savings are deposited assets to be traded between one another. In return they give Brits back absolutely miniscule interest – per year – for the capital they’ve unknowingly invested into them.
When asked about the reason they use a bank account, almost half of the respondents (48 per cent) said that they use a bank account because they don’t know where else to put their money, while more than half (53 per cent) say they do not have enough knowledge of the alternative investment methods available to them.
Greg added that while the Bank of England’s anticipated interest rate hike in May will go some way towards helping consumers earn more on their savings, it’s too little too late! It’s clear from the research that consumers, who have bared the brunt of flat interest rates over the last 10 years, are considering alterative, higher return investment methods.