The European Central Bank is now charging 0.5% for depositing with it when it used to give some 2% on such deposits.
This has led banks to offer savings rates of close to 0%, and in some rare cases even negative.
Germany in particular is being hit as ECB tries to get frugal Germans to spend to increase inflation to the target of 2%.
Germans however are instead turning to life insurance, a product that is more capital accumulation payable at old age or on death.
These insurance products pay a guaranteed interest rate of as high as 3.30% with the biggest of them, AXA, paying 2.90% a year while the average is at 2.23%.
So showing clearly why more and more Germans are turning to these products with a local paper stating Germans paid €120 billion into life insurances.
While the interest rate here is considerably higher than what banks offer in savings accounts, it still pales in comparison to the interest rate provided by even newer products in the Decentralized Finance (DeFI) area.
Even USDC provides an interest rate of 4.08% with any savings here instantly accessible while the interest rate is guaranteed by proven deposits instead of “trust us” insurance companies which can go bust as AXA almost did during the banking crash.
USDC as you might know is a tokenized dollar by Coinbase and Circle with Coinbase allowing you to one click convert USD into USDC which can then be sent to Compound.
DAI is a bit different as it has no central entity, but a smart contract that allows the creation of dollar pegged dai based on eth collateralization with the dapp itself here giving close to 8% in yearly interest.
Quite interestingly even the tokenized bitcoin gives 1.71%. This is in bitcoin, rather than dollars, making it potentially the highest savings rate for bitcoin.
It is probable this life insurance product can also be turned into just a smart contract with the guaranteed interest there potentially coming from offering the capital on Compound or other dapps.
As this would take out middle men with their huge skyscrapers which are paid by the savers, you’d expect the interest rate to be higher on dapps with that being the case so far.