The residents of Latvia still believe that the safest way to save money is cash, and only one in seven entrust their money to banks for this purpose. This conclusion follows from the survey conducted by the research agency Norstat.
Although the majority of workers receive their wages in a bank account, only 14% of all respondents consider the bank to be an appropriate place for saving money. Recipients of the lowest wages have the most negative attitude towards financial institutions. Among the minimum wage recipients, less than 1/10 of respondents trust banks; whereas among workers earning from 1000 to 1500 euros, 22% of respondents consider savings in a bank to be the safest type of savings. One in five respondents feel at ease if spare cash is with them in a tangible form, and 19% consider gold to be the safest investment.
The survey shows that generally people do not particularly trust bank deposits. When invited to evaluate their confidence in banks on a 5-point scale, the majority or 38% chose the mark 3. Only 6% of respondents fully trust banks; 27% chose the mark 4; 16% evaluated their confidence level as 2, and 12% have no trust at all. It is interesting that people who have reached retirement age give banks the highest evaluation; whereas young people up to 29 years of age are the ones who trust banks the least.
“The results of the survey have prepared valuable food for thought for managers of universal banks. If the senior generation did not trust the deposit offers, it could be explained by bad memories of losing money during currency reforms and bank bankruptcies in the past years. However, it is the youngest generation who consider bank deposits unsafe; those who are just starting their employment journey and are going to remain an economically active part of society for many years to come. This is a sign that the deposit conditions offered by universal banks are unattractive – low rates, inflexible money withdrawal policies, and similar drawbacks. For example, some of our new clients have chosen to deposit their money with Bigbank because their primary bank offers very low term deposit rates,” said Ģirts Kurmis, Head of Bigbank Latvija, commenting on the results.
According to the information summarised on the website Gudriem.lv, the most profitable term deposit is offered by the specialised credit bank Bigbank. For example, a rate of 1.75% is applied to a three-year deposit of 3000 euros, and the amount earned will be almost twice higher than from the second most profitable offer found among banks in Latvia. All client deposits at Bigbank are protected by the Guarantee Fund of Estonia. Deposits at Bigbank are insured in accordance with the Guarantee Fund Act, which provides for deposits up to EUR 100 000 to be 100% compensated.
“We need to emphasise that deposits are not only savings products, such as savings deposits, but also money in current accounts used by almost every resident of Latvia. The safety of the depositors and their deposits is of utmost importance to any bank. Thus, a bank deposit, which is additionally protected under the deposit guarantee scheme, is definitely safer than keeping money in cash,” says the Finance Latvia Association manager Sanita Bajāre. “Currently, in the state of emergency caused by COVID-19, when safety measures need to be strictly observed, it is recommended to avoid cash, which is the perfect carrier of infections. Clearing transactions and contactless payments are definitely preferred. Moreover, banks have increased the contactless payment limit for cards to 50 euros to limit the spread of COVID-19 in Latvia and reduce contact with other people and the surfaces of payment terminals. We also need to note that banks continue providing the opportunity for all groups of residents to use online banking and are mobilising all their resources for providing distance services.”
The Latvian Chamber of Commerce and Industry board member Katrīna Zariņa notes that the present situation sheds bright light on the financial literacy of Latvian enterprises, especially the sector of micro- and small enterprises, and the residents. These issues have also been discussed before the crisis, and the conclusion has always been that these skills need to be improved in all groups and it needs to be done early, starting from preschool and continuing at all later stages of education, including it in the curricula. Improving these skills overall would promote the understanding of residents of how to take care of themselves in situations when regular income is lost or its amount decreases. Whereas enterprises in crisis require support from commercial banks offering funds for current assets as well as setting better rates and loan repayment conditions.
“During COVID-19, we are also experiencing a clear boom of e-commerce. Namely, cash circulation decreases; new service supply chains and new business opportunities are created. Sales and catering places, which continue working in the non-virtual environment, also encourage clients to make use of the opportunity to pay for goods using cards as much as possible, which contributes to reducing the spread of the virus,” emphasises K. Zariņa.
AS Bigbank is an Estonian bank specialising in consumption credit and corporate loans, as well as in providing profitable term deposit services. The company expanded its activities outside Estonia, establishing branches in Finland, Sweden, Latvia and Lithuania, as well as offering cross-border services in Austria, Germany and the Netherlands. The company is led by Martins Lants, a Board Member of the Group. Svens Raba, Marts Veskimagi and Argo Kiltsmans are also Members of the Board.