Turnaround in interest rates: Trade Republic is heating up competition with two percent interest rates

The online broker Trade Republic is allowing its customers to benefit from the interest rates that are rising again, thereby heating up competition in the industry.

Trade Republic announced on Wednesday in Berlin that every customer should now receive two percent effective annual interest on the money balance in their clearing account.

Interest is to be paid monthly.

The offer applies to cash balances of up to 50,000 euros.

With this step, Trade Republic wants to expand its market leadership as Europe's largest savings platform.

"We are effectively offering two percent per annum for all existing customers and for all new customers," said company co-founder Christian Hecker.

"There's no asterisk, it's not limited in time." What Trade Republic offers is the highest effective interest rate per annum that exists in the German market.

"The offer is valid until further notice," he said.

Interest rate turnaround takes place

From Hecker's point of view, the phase of negative interest rates in Europe will be over for the foreseeable future.

"We are now probably facing several years of positive interest rates," he said.

In the summer of 2022, in its fight against high inflation, the European Central Bank (ECB) completed the turnaround on interest rates and has now raised the key rates four times in a row, sometimes in unusually large steps.

Negative interest rates have been abolished: The deposit rate that banks receive from the central bank for parking excess funds and which is currently the relevant interest rate for the financial markets is now 2.0 percent.

This was still negative in June 2022, which meant penalty interest for the institutes.

ECB President Christine Lagarde has also announced further rate hikes.

Trade Republic's existing business is already relatively large, Hecker said.

"Offering the interest account now is the next logical step for us." Trade Republic has risen to become one of the largest brokers in Europe in recent years.

"Today we already have well over a million customers and manage billions in customer assets," he explained.

Founded in 2015, the fintech company, which offers commission-free ETF and stock savings plans as well as investments in cryptocurrencies, closed another financing round of EUR 250 million last year.

This was led by the Canadian pension fund Ontario Teachers.