Europeans hold vast amounts of money in bank accounts, but a significant portion of that savings does not yield returns that exceed inflation. According to a study by Revolut, approximately €6.3 trillion is held in low-yield deposits across 20 EU member states, and the consequence of this situation is the loss of the real value of savings. In 12 out of the 20 observed countries, the average one-year interest rates on deposits are lower than inflation, with an overall average interest rate of 2.76%, while inflation stands at 2.94%. In other words, for every €10,000, savers are losing an average of €294 in purchasing power annually.
All of this data comes from Revolut’s European Wealth Drain Index, which was created based on a survey conducted among 20,007 adults in 20 member states, along with official data on deposits and inflation.
Loss Due to Inflation is Just Part of the Story
According to Revolut’s calculations, if the cash sitting idle were compared to the ten-year annualized return of an ETF tracking MSCI Europe, at 9.06%, the average missed return would amount to €638 annually for every €10,000. When this difference is applied to the €6.3 trillion in deposits covered by the study, it results in a staggering €422 billion annually.
Although this amount sounds promising, it should be noted that it is an estimate of missed potential returns, not an actual loss, as investing in the capital market carries risks and is not comparable to holding money in a deposit.
Why Money Remains in the Bank
According to the research, the problem lies not only in the offers from banks but also in the behavior of savers. Two-thirds of respondents have never changed banks to obtain a better interest rate. 26% say they simply prefer their current bank, 18% believe the difference in interest rates is negligible, and 15% do not know where to look for better conditions. Almost half of the respondents, 46%, incorrectly assess the returns on their savings after accounting for inflation, while 19% are completely unaware that inflation affects the value of the money they hold.
The fragmentation of financial services also poses a problem. More than half of the respondents use multiple financial applications, and among them, 45% say that this fragmentation makes investing more difficult. At the same time, one in five Europeans has no savings at all.
Among citizens who do not invest, the biggest barrier is the perception of risk, cited by 29% of respondents, while 27% mention a lack of knowledge.
Revolut’s head of wealth and trading, Rolandas Juteika, dismisses the idea of automatically enrolling citizens in investment programs. He believes that such an approach would not solve the underlying issues, which are the perception of risk and lack of knowledge.
Revolut, meanwhile, has its own business interest in increasing citizen investments. The company has over 80 million users and states that the number of active small investors from the EU on its platform has increased by as much as 56% in a year.
Three Different Europes
It should also be noted that the differences among European countries are quite significant. In Central and Eastern Europe, the gap between inflation and deposit interest rates is the largest. Bulgaria leads with a difference of 2.3 percentage points, followed by Slovakia with 1.7 and Lithuania with 1.3 percentage points. Interestingly, at the same time, this group shows the highest willingness to invest small amounts. In Bulgaria and Romania, 51% of respondents say they would be willing to start investing.
Western and Southern Europe hold the largest amounts of inactive cash. In Germany, this amounts to about €1.9 trillion, and in France, about €588 billion. These countries also have an estimated gap between potential returns and holding cash of six to seven percent. In Northern Europe, deposit interest rates generally keep pace with inflation, but awareness of its impact is weaker. In Denmark and Sweden, less than 40% of respondents understand how inflation affects the long-term value of their money.
