Fintech challenger bank Monzo is launching its first interest-earning savings pot.
Customers will be able to create so-called savings pots within their Monzo account that will earn interest at one per cent per year, paid monthly, on savings of £1,000 and above.
Customers can open up to 10 savings pots and can take money out of these at any time, with the funds being returned to their main Monzo account the next working day.
The bank said the feature is the most significant move it has made so far towards its goal of offering a broader range of financial products from different companies in a so-called marketplace model.
The rate outperforms rival Starling Bank, which pays interest on balance at 0.5 per cent AER up to £2,000 and 0.25 per cent on balances above that, up to £85,000.
Meanwhile Revolut, another app-based fintech firm, does not currently offer interest on its accounts.
However in September, Goldman Sachs released a new easy-access digital savings account called Marcus, which currently offers an even more competitive 1.5 per cent AER.
Investec Corporate & Investment Banking, which currently manages more than £1bn on behalf of other institutions, will manage the savings and pay customers the interest.
Tom Blomfield, chief executive at Monzo, said: “At Monzo, our goal is to build a marketplace bank, that lets people access a choice of products and services from across the market, all from within one app.”
“By working with firms like Investec, we’re giving our customers the convenience and control they need to make money work for them.”
Monzo confirmed that it will be earning commission from Investec, highlighting the new feature as a future revenue stream after revealing losses of £33.1m in July.
Monzo announced yesterday that it had closed a fresh fundraising round at £85m – putting Monzo’s valuation above £1bn and cementing its position among the UK’s so-called unicorn startups.
The bank said it now represents 15 per cent of all new bank accounts opened in the UK each month, after hitting 1m users in September.
Monzo said the new service will be rolled out slowly, and it will email users when they are able to start using the new pots.