West Bank's deposits totaled $1.25 billion at year end 2009 compared to $1.16 billion a year ago. Deposits associated with SmartyPig, the online savings program developed by Des Moines entrepreneurs, grew $179 million during 2009 and totaled $187 million at year end. SmartyPig's success in attracting deposits is outgrowing West Bank and in all likelihood SmartyPig deposits will transition to a much larger bank in 2010. West Bank has been planning for this transfer and has adequate liquidity to facilitate that transfer.
My main concern is how this might affect SmartyPig's interest rate. According to SmartyPig's FAQ #9:
The Average Interest Yield (APY) is determined by our bank partner, West Bank. The APY may be changed without notice.
A new partner may not be so generous with the interest rates as West Bank has been.
SmartyPig was launched in early 2008, and its rates have remained near the top for nationwide savings accounts (see SmartyPig's rate history). It's currently paying 2.01% APY.
The SmartyPig account is different than the typical online savings account. Those expecting a typical online savings account may be annoyed with some of the account requirements and features. This NYT blog post has a good description of why it's different:
But the company is not in the business of attracting rate chasers like me, since it works with a partner bank and doesn't make money from lending out customer deposits. Instead, SmartyPig earns a small cut from its partner retailers if customers save toward a goal and then meet that goal by buying a television, say, or a vacation through those partners.
SmartyPig doesn't keep all of the money it gets from its partner retailers. Some of it goes to the cash boosts that SmartyPig provides to its customers. So even if the interest rate does become less competitive, these cash boosts can still make it an attractive account, at least for the non-rate chasers.
For more details of SmartyPig, please refer to my December SmartyPig review.