Smart Deposit - The Killer of Savings and Term Accounts

In 2022, central banks began raising interest rates with the aim of bringing record-high inflation under control. After practically 14 years of zero rates, interest rates rose. Most of us felt this rise (or will feel it at the next anniversary of our fixed-rate mortgage) through a sharp increase in mortgage rates.

However, we mustn’t forget the other side of the coin. Higher interest rates should finally reward savers as well. Risk-free deposits are now earning interest around the world – the deposit rate of the European Central Bank (ECB) is at one of the highest levels in its history.

Commercial banks are in no rush to raise interest rates on your deposits. In the ECB, however, they can today deposit their surplus funds at 2% and lend to each other overnight at 1.92%. 

That is why we decided to introduce a product that reflects current interest rates and puts your money – which is sitting idle in your bank account – to work.

Store your short-term savings with liquidity, conservatively, with minimal volatility. We present the killer of term deposits and savings accounts – Smart Deposit, thanks to which your money will earn returns at the level of market interest rates, with no lock-in period or special conditions.

What is Smart Deposit?

Smart Deposit is Finax’s most conservative investment product with stable returns, designed for storing savings for up to one year. It represents a lucrative alternative to savings accounts and term deposits.

It uses instruments that replicate the base interest rates of the eurozone. As a result, its value grows continuously and fluctuates only when the central bank changes its interest rates (see the annual chart above).

It is built on ETF funds designed to track the euro interbank interest rate, and on bond ETFs comprising the least risky bonds with a maturity of up to one year and the highest rating.

The returns of Smart Deposit reflect the ECB’s base deposit rate with a short lag, reduced by fund and Finax fees.

The ECB raised rates for the first time in July 2022. The deposit rate reached 0% at that point, and in September the central bank raised it further to 0.75%. After that, the underlying funds of Smart Deposit began to produce yields. As the ECB continued to raise rates, the returns of funds linked to interest rates accelerated as well. When the ECB cuts them again, the growth of the underlying funds will slow down.

Until autumn 2022, such funds replicated negative interest rates that Europe had experienced for more than 8 years, which is why the value of the funds had been declining for several years until then.

Notice how steadily the value of Domino’s transparent account shown above is growing. This is the development of a real account, on which you can see that volatility on Smart Deposit is virtually non-existent. Please note that past returns are not a guarantee of future performance.

Advantages of Smart Deposit

• The possibility of earning a gross return close to the ECB’s base deposit rate. 
• Current yield is 1.9% p.a.* (as of May 18^th, 2026) – variable depending on ECB interest rate developments.
• Minimal volatility.
• Lowest risk rating of 1 on the 7-point SRI indicator scale.
• One low fee – portfolio management fee of 0.5% p.a. including VAT.
• No lock-in period whatsoever with weekly liquidity.

*The expected return is calculated as a weighted average of the current euro short-term rate (€STR) replicated by 59.4% of Smart Deposit’s portfolio, and the average yield to maturity of bond ETFs (40%), reduced by the ETF fund fee. The Finax portfolio management fee of 0.5% p.a. including VAT is not included in the yield. Future performance may vary. Tax treatment depends on the individual circumstances of each client and may change in the future.

If you’d like to go really deep into the information and learn as much as possible about this product, feel free to read on. For those who are busier, I offer just a quick overview of the key facts along with links to the sections that may interest you.

1. Who is Smart Deposit suitable for?
For anyone who does not want to take on the higher risk of more dynamic portfolios, wants to have their money available at all times, and wants to grow it significantly more than what banks offer today.

2. How do I open a Smart Deposit?
Online on the Finax website – simply click the Open Smart Deposit button below or the I Want to Start button anywhere on the Finax website.

3. What is the composition of Smart Deposit?
60% of the portfolio consists of two so-called overnight ETF funds and 40% consists of short-term bond ETF funds.

4. Can the ECB change the level of interest rates?
The ECB meets approximately once a month, at which point it may review the base interest rates. Changes in interest rates constitute the largest component of risk for this product.

5. Should I invest in the Wallet or in Smart Deposit? 
Both products are short-term. If you do not want to tie up your deposits in any way, choose Smart Deposit. The Wallet is more suitable for a 1-to-3-year horizon.

If you are interested in more details, the following information is intended just for you.

Who is Smart Deposit suitable for?

Given the nature of Smart Deposit, it is best used as an alternative to bank deposit products, whether a savings account or a term deposit. To achieve the same return in a bank, you would need to lock your money away for several years. At Finax, however, you get it with practically immediate access to your funds.

You can also use Smart Deposit as an emergency reserve, savings for a holiday, Christmas gifts, taxes, or for the purchase and payment of anything you will be paying within one year. With minimal fluctuations, you need not worry about having less money in your account when you want to make a withdrawal.

Many people, despite the obvious drawbacks and inflation, still feel the need to keep a larger sum in cash or in a current bank account. A similar category comprises money we don’t know when we will use. With weekly liquidity, Smart Deposit is a suitable option for storing a large portion of these funds.

It is also interesting for placing company profits and reserves. We remind you that at present we allow legal entities to open an account at Finax with a minimum amount of €50,000. We are pleased that several companies with deposits of over €1 million have already used this product during the testing phase.

How do I open a Smart Deposit?

If you are not yet a Finax client, click on our website I Want to Start or the Open Smart Deposit button in this blog post or download the Finax mobile app on App Store, or Google Play. Opening an account with Smart Deposit is very straightforward and will take you 10 minutes of your time.

At the beginning of registration, select Smart Deposit as your goal. You will complete a short questionnaire, verify your identity, fill in your personal details, sign the contract online, send money and you can start growing your savings. You will be able to monitor their growth conveniently online in the mobile app or on the Finax website.

Existing clients can simply add an account by clicking on Open New Account in the menu (More) in the mobile app or the Open New Account button in the account overview when logged in online on the website.

The Smart Deposit account is available only in the latest version of the Finax mobile app. Don’t forget to update the app before you proceed to create an account for storing short-term and conservative savings.

Portfolio Composition 

All the advantages and characteristics of Smart Deposit stem from its composition, namely the underlying assets on which this conservative investment product is built.

The portfolio consists of four ETFs – two funds track the short-term interbank interest rate, and two funds invest in short-term bonds with a maturity of up to six months.

30% of the portfolio is invested in an ETF fund focused on short-term euro government bonds. These are bonds of eurozone countries with an investment-grade rating and a maturity of up to 6 months, making them the safest securities Europe has to offer. Specifically, the fund invests in bonds of countries such as Germany, France, the Netherlands, Italy, Spain, Belgium and Portugal.

10% of the value of Smart Deposit is diversified with short-term euro corporate bonds with an investment-grade rating (identical quality to the government bonds mentioned above). The average maturity of these bonds is up to six months. The fund is highly diversified both regionally and across sectors.

In both bond ETFs, the average maturities and durations are so short that the prices of the included bonds do not react to rising interest rates with a decline, but rather with an increase. The returns of very short-term bonds are positively correlated with interest rates and, with a short lag, reflect the movement of rates.

59.4% of the initial assets consist of two ETFs that track the returns of the short-term euro interest rate €STR (Euro Short Term Rate). This rate reflects the interest rates at which banks lend their excess liquidity to each other overnight (so-called overnight deposits and rates).

These rates are derived from the ECB’s base deposit rate and are also influenced by liquidity and other conditions in the interbank market. The €STR itself is not an investable asset. It is set by the ECB on the basis of interbank market developments as an average of banks’ overnight deposits.

These funds track this rate through so-called swaps (forward contracts). These are ETFs that synthetically replicate an index. In the past, we viewed these funds as riskier, as investors bore not only market and interest rate risk but also the counterparty credit risk (of the bank). 

However, that has changed. Regulation today permits retail UCITS funds only a very small, negligible uncovered derivative position with any single counterparty, which significantly reduces credit risk. These positions are fully covered in the funds by high-quality securities such as government bonds, or corporate bonds or shares of large companies.

How do changes in interest rates affect Smart Deposit?

The base interest rates set by the European Central Bank are the primary factor affecting the return on Smart Deposit. Given its focus on short-term interest rate returns, the expected return is directly proportional to the development of the ECB’s interest rate policy.

An increase in rates will be reflected fairly quickly in a higher return on Smart Deposit. For ETFs tracking the overnight rate, this is a matter of a few days. For bond funds, a tightening of central bank policy will manifest with a slight lag, or even in advance, in line with market expectations. The same applies equally when interest rates are reduced.

If the ECB continues to raise interest rates, investors in Smart Deposit will benefit from this course of action. However, we must not forget that any reduction in rates will lower returns.

The charts of the underlying ETFs illustrate this perfectly. In the following chart of individual ETFs, you can see exactly when interest rates in the eurozone were raised from negative into positive territory. At precisely that moment, these funds began to earn returns and the money market began to recover after more than a decade.

Risks of Smart Deposit – is it as safe as a bank deposit?

The greatest risk for the Smart Deposit product is so-called interest rate risk. If the eurozone economy were to fall into a deeper recession and the price level were to stagnate or even decline, the central bank might again reduce rates, which would be reflected in the future return on Smart Deposit.

The risk is therefore falling interest rates, which would mean lower returns. We will inform investors of every change in rates and the expected return on Smart Deposit.

Smart Deposit is the least risky investment solution we could offer our clients. This is confirmed by the risk assessment itself according to the PRIIPs methodology, which assigns the lowest SRI 1 risk rating on a 7-level scale to all four ETF funds.

Credit risk in Smart Deposit is similar to the credit risk of a bank deposit. Investors also bear counterparty risk, which is however fully mitigated. In the case of ETFs tracking the overnight interbank interest rate specifically, the counterparty risk arises from the swap contracts through which the fund achieves this return. The counterparties are major banks (e.g. Société Générale, Deutsche Bank, and others).

Within the fund, the risk of any single counterparty may not exceed 10%. Swaps are also fully collateralised. Only an amount of €500,000 may not be collateralised in the case of derivatives, which represents a truly negligible amount for funds with assets under management in the billions of euros.

In the event of counterparty default, the assets of the substitution basket remain in the fund’s property (high-quality bonds, or shares).

What is the difference between Smart Deposit and the Wallet?

Despite both Smart Deposit and the Wallet being conservative short-term products, there are certain differences between them.

The Wallet contains a lower share of ETFs replicating bank deposits. While in Smart Deposit these funds have a share of 59.4%, in the Wallet they have a weighting of 39.4%. The remainder of its portfolio consists of a bond component, built on bond ETF funds with a somewhat longer maturity than those in Smart Deposit. Longer-term bonds carry slightly higher risk, but at the same time generate a higher return over the long term.

The Wallet is therefore most suitable for clients with an investment horizon of 1 to 3 years who would like to earn a slightly higher expected return than Smart Deposit will offer in most periods.

I believe our new product will appeal to you. We see it as a significant milestone, on a par with the launch of Intelligent Investing or obtaining authorisation for the sale of the Pan-European Personal Pension Product.

Finax once again brings you something that is very difficult to find on the market. If you want to get a comparable interest rate in a bank, you must lock your funds away for several years, or the conditions are limited to a certain volume.

Enjoy market interest rates with Finax and all the advantages that our investment approach and ETF funds offer. We will be very happy to answer any questions you may have. Do not hesitate to contact us by phone at +421 232 447 760 or send your question by email to [email protected].