Carmaker Renault Group is launching a UK retail savings bank through its financing brand RCI, offering high-interest-rate products in an attempt to attract funding.
RCI Bank opens on Monday with a digital account paying 1.5 per cent as the first in a range of savings products coming to market this year.
The launch means RCI becomes the only car finance arm to actively operate in the UK savings sector.
It comes as a number of new lenders attempt to break into retail banking, with Open Bank and Atom among four undergoing the application process.
RCI is seeking to gather deposits initially through its freedom savings account as it aims to diversify funding away from the money markets.
The account, accessed online with call-centre support, allows for investments of between £100-£1m, with no penalties, notice periods or tiered rates. Customers will link to it through their existing bank current accounts.
Steve Gowler, chief executive of RCI Bank, said: “We want rates to be attractive all the time, so we will not launch with an attractive offer and then cut back.”
The financing group, which has launched similar retail banking ventures in France, Germany and Austria over the past four years, is aiming for retail deposits to represent 30 per cent of its funding, a target it hopes to achieve through expanding into the UK.
The bank is operating through a “passport system” as a UK branch of the French group. While RCI Bank is overseen by UK regulators, savers will be protected under the French guarantee system of up to €100,000 rather than the Financial Services Compensation Scheme which covers up to £85,000.
Savers’ money will be used to help fund car financing in the UK, a sector in which RCI has been active for 20 years with the Renault, Nissan, Dacia, Datsun and Infiniti brands.
Mr Gowler said: “Our car finance business is growing organically. The total number of new cars sold is back at pre-crisis levels.”
The bulk of RCI’s car financing operation is personal contract purchase, whereby borrowers pay regular interest on a car loan with a “balloon payment” at the end. Borrowers often ultimately trade in the car, so the dealer pays off the “balloon” and profit is rolled up into the next car purchase.
Mr Gowler said PCP is a form of secured loan with high quality borrowers who undergo stringent credit checks, providing savers with transparency in knowing where their money is being channelled.
“We looked at other countries to launch the bank and we thought there are strong prospects for internet banking in the UK,” Mr Gowler said. “There’s demand for a more competitive savings market.”
[“source – ft.com”]