Digital bank N26 puts it up to Irish banks with instant-access savings account paying 4pc

The move is the latest attempt by a non-Irish based financial services company to provide far higher deposit rates than Irish banks.

Berlin-headquartered N26 will pay interest of 2.8pc for those with Standard, Smart and You accounts on savings, with the more expensive N26 Metal customers getting a 4pc rates.

These are multiples of what the banks here are paying on instant-access accounts.

There is no cost for having an N26 Standard account, but a monthly fee of €4.90 for operating the N26 Smart current account, with a cost of €9.90 a month for the You account, and €16.90 a month for the Metal account.

At the start of the year Netherlands-headquartered digital only or “neo-bank” Bunq launched an instant-access savings account that pays an interest rate of 2.46pc, around 10 times more than a similar account with the main domestic banks.

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N26’s move put it up to the banks here just weeks after both AIB and Bank of Ireland reported profits of around €2bn each largely because savers are reluctant to move funds out of overnight and current accounts that pay little or nothing in interest.

The N26 rates apply without minimum or maximum deposit requirements or limits, and are for existing and new customers.

N26 already offers banking and crypto trading to its Irish customers.

The digital bank said its Instant Savings account could be activated in the N26 app, and customers would be able to move their funds between their interest-bearing instant savings account and their main account at any time.

Interest income is calculated daily based on the balance in the account, taking into consideration any funds moved in and out of the account that day, and is then paid out at the beginning of the following month.

Chief executive at N26 Valentin Stalf said all funds held with N26, including those in N26 Instant Savings accounts, were protected up to €100,000 per customer by the German Deposit Protection Scheme.

At the start of the year it emerged that Irish savers were piling €1m a day into digital bank Bunq after it started offering rates dramatically higher than the domestic banks.

The Netherlands-headquartered bank had a tenfold increase in Irish user sign-ups last year.

The sharp rise in savings being shifted by Irish customers came after Bunq launched an instant-access savings account that pays an interest rate of 2.46pc, around 10 times more than a similar account with the main domestic banks.

The Bunq Easy Savings account poses a significant competitive challenge for domestic banks that pay little or no interest on savings in instant access or “overnight” accounts.

The vast majority of around €152bn in household savings in this country is parked in instant-access accounts paying little or nothing.

This means savers in this country are collectively missing out on up to around €3.5bn in interest a year, according to research carried out by Daragh Cassidy of Bonkers.ie.

He encouraged savers to put their money into higher-yielding savings accounts to benefit from the higher rates of interest that are now available.

AIB and the Central Bank have both stated that savers in this country have been slow at moving their money into higher-yielding savings accounts.